For Tax Professionals  
T.D. 8893 July 18, 2000

Retention of Income Tax Return Preparers' Signatures

DEPARTMENT OF THE TREASURY  
Internal Revenue Service 26 CFR Part 1 [TD 8893] RIN 1545-AW52   

TITLE: Retention of Income Tax Return Preparers’ Signatures    

AGENCY: Internal Revenue Service (IRS), Treasury.     

ACTION: Final regulations.  

SUMMARY: This document contains final regulations that provide      
income tax return preparers with two alternative means of meeting     
the requirement that a preparer retain the copy of the return or     
claim manually signed by the preparer. The regulations are      
necessary to inform preparers about the two alternatives and to     
provide them with the guidance needed to comply with the     
alternatives.  

DATES: Effective Date: These regulations are effective July 18,      
2000. 

     Applicability Date: For dates of applicability, see     
§1.6695-1(g) of these regulations.   

FOR FURTHER INFORMATION CONTACT: Beverly A. Baughman (202) 622-     
4940 (not a toll-free number).   

SUPPLEMENTARY INFORMATION:  

Background 

     This document contains amendments to the Income Tax    
Regulations (26 CFR part 1) relating to the penalty for failure     
to sign an income tax return under section 6695(b) of the     
Internal Revenue Code.  

     On December 31, 1998, final and temporary regulations (TD    
8803, 1999-12 I.R.B. 15) under section 6695 were published in the     
Federal Register (63 FR 72182). A notice of proposed rulemaking      
(REG-106386-98, 1999-12 I.R.B. 31) cross-referencing the     
temporary regulations was published in the Federal Register (63     
FR 72218) on the same date. Although written or electronic      
comments and requests for a public hearing were solicited, no     
comments were received and no public hearing was requested or     
held. The proposed regulations under section 6695 are adopted by      
this Treasury decision and the corresponding temporary    
regulations are removed.  

     Section 6695(b) provides that any person who is an income    
tax return preparer with respect to a return or claim for refund,     
who is required by regulations prescribed by the Secretary to     
sign the return or claim, and who fails to comply with those     
regulations, must pay a penalty of $50 for such failure, unless     
it is shown that the failure is due to reasonable cause and not     
willful neglect. The maximum penalty imposed with respect to      
documents filed during a calendar year will not exceed $25,000.     

     Section 7701(a)(36)(A) provides that, in general, the term    
income tax return preparer means any person who prepares for     
compensation, or who employs one or more persons to prepare for     
compensation, any return of tax or claim for refund imposed by     
subtitle A. For purposes of the preceding sentence, the      
preparation of a substantial portion of a return or claim is     
treated as if it were the preparation of such return or claim.     

     Section 1.6695-1(b)(1) generally provides that an income tax    
return preparer, with respect to a return or claim for refund,     
must manually sign the return or claim (which may be a photocopy)     
in the appropriate space provided on the return or claim after it     
is completed and before it is presented to the taxpayer (or     
nontaxable entity) for signature.   

Explanation of Provisions  

     The final regulations provide that the employer of the    
preparer or the partnership in which the preparer is a partner,     
or the preparer (if not employed or engaged by a preparer and not     
a partner of a partnership which is a preparer), must retain the     
manually signed copy of the return or claim. In the alternative,      
the person required to retain the manually signed copy of the     
return or claim may either retain a photocopy of that manually     
signed copy or use an electronic storage system meeting the     
requirements of section 4 of Rev. Proc. 97-22 (1997-1 C.B. 652),     
or procedures subsequently prescribed by the Commissioner, to     
store and produce a copy of the return or claim manually signed     
by the preparer.  

Special Analyses  

     It has been determined that this Treasury decision is not a    
significant regulatory action as defined in Executive Order     
12866. Therefore, a regulatory assessment is not required. It       
also has been determined that section 553(b) of the    
Administrative Procedure Act (5 U.S.C. chapter 5) does not apply     
to these regulations, and because the regulations do not impose a     
collection of information on small entities, the Regulatory     
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to      
section 7805(f) of the Internal Revenue Code, the notice of     
proposed rulemaking that preceded these regulations was submitted     
to the Chief Counsel for Advocacy of the Small Business    
Administration for comment on its impact on small business.     

Drafting Information  

     The principal author of these regulations is Beverly A.    
Baughman of the Office of Assistant Chief Counsel (Income Tax &     
Accounting). However, other personnel from the IRS and Treasury      
Department participated in their development.    

List of Subjects in 26 CFR Part 1   

     Income taxes, Reporting and recordkeeping requirements.    
Adoption of Amendments to the Regulations    

     Accordingly, 26 CFR part 1 is amended as follows:   

PART 1--INCOME TAXES  

     Paragraph 1. The authority citation for part 1 is amended     
by removing the entry for section 1.6695-1T and by revising the     
entry for section 1.6695-1 to read in part as follows:    

     Authority: 26 U.S.C. 7805 * * *  

     Section 1.6695-1 also issued under 26 U.S.C. 6060(b) and    

6695(b). * * *  

     Par. 2. Section 1.6695-1 is amended by:   

     1. Revising paragraph (b)(4)(i).   

     2. Adding paragraph (g).   

     3. Removing the authority citation immediately following     
the end of the section.  

     The revision and addition read as follows:   
§1.6695-1 Other assessable penalties with respect to the      
preparation of income tax returns for other persons.    

* * * * * 

     (b) * * * 

     (4)(i) The manual signature requirement of paragraphs (b)(1)    
and (2) of this section may be satisfied by a photocopy of a copy     
of the return or claim for refund which copy is manually signed     
by the preparer after completion of its preparation. After a      
copy of the return or claim for refund is signed by the preparer     
and before it is photocopied, no person other than the preparer     
may alter any entries on the copy other than to correct    
arithmetical errors discernible on the return or claim for     
refund. The employer of the preparer or the partnership in which      
the preparer is a partner, or the preparer (if not employed or     
engaged by a preparer and not a partner of a partnership which is     
a preparer), must retain the manually signed copy of the return     
or claim for refund. In the alternative, for a return or claim      
for refund presented to a taxpayer for signature after December     
31, 1998, and for returns or claims for refund retained on or     
before that date, the person required to retain the manually     
signed copy of the return or claim for refund may choose to     
retain a photocopy of the manually signed copy of the return or     
claim for refund, or use an electronic storage system to store     
and produce a copy of the manually signed return or claim for     
refund. For purposes of this paragraph (b)(4)(i), an electronic      
storage system must meet the electronic storage system    
requirements prescribed in section 4 of Rev. Proc. 97-22 (1997-1     
C.B. 652)(see §601.601(d)(2) of this chapter) or other procedures     
prescribed by the Commissioner. A record of any arithmetical      
errors corrected must be retained and made available upon request     
by the person required to retain the manually signed copy of the     
return or claim for refund.   

* * * * * 

     (g) Effective date. This section applies to income tax     
returns and claims for refund presented to a taxpayer for     
signature after December 31, 1998, and for returns or claims for     
refund retained on or before that date.   

Section 1.6695-1T [Removed]   

     Par. 3. Section 1.6695-1T is removed.    

Robert E. Wenzel  
Deputy Commissioner of Internal Revenue   
Approved: 6/30/00 
Jonathan Talisman  
Deputy Assistant Secretary of the Treasury


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