IRS Won't Let Taxpayers Hide Behind Preparers' Coattails | AccountingWEB

IRS Won't Let Taxpayers Hide Behind Preparers' Coattails

The U.S. Treasury Department has released proposed rules that limit the likelihood of a "My Accountant Told Me I Could Do This" defense for tax return deductions. In the past taxpayers have been successful at blaming their tax indiscretions on their tax preparers and avoiding penalties resulting from non-allowable deductions.

Now the Treasury Department and the Internal Revenue Service have decided to crack down on those taxpayers who try to avoid penalties by blaming bad deductions on their accountants. "We are raising the stakes for taxpayers who fail to disclose potentially abusive transactions to the IRS," said Pam Olson, Treasury assistant secretary for tax policy. "Too many tax advisors have counseled clients against disclosing their transactions with the expectation that the advisors' opinions will allow the clients to avoid penalties."

Under the new rules, taxpayers must disclose any transactions on their tax returns that challenge Treasury regulations. Without such disclosure, taxpayers may not rely on an opinion from their tax advisor as a defense against a potential penalty.

Comments on the proposed rules may be submitted by March 31, 2003 to:

CC:IT&A:RU (REG-126016-01), Room 5226
Internal Revenue Service
POB 7604, Ben Franklin Station
Washington, DC 20044

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