El Paso, TX CPA / Marcus, Fairall, Bristol + Co., LLP

The story behind all those disclaimers on emails and letters.

You probably have seen emails and communications from Attorneys and other CPA's with what seems like a complete disclaimer for anything they have told you in the email. There is a reason for that and its called an, "IRS Circular 220 Disclosure".

The Treasury Department has broad authority to implement and enforce rules and regulate the accountants, attorneys and enrolled agents who advise taxpayers and represent taxpayers before the IRS. In response to the tax shelter abuse and other concerns, the IRS updated Circular 230, which can be described as a set of rules – a code of conduct – governing tax practitioners. Failure to comply with Circular 230 may result in license suspension and fines.

Circular 230 is long, incredibly complex, vague and addresses a broad range of topics. Generally, it requires that all forms of written tax advice be accompanied by one of the following two items:

(1.) A complete analysis of all relevant tax issues, discussion of the legal authority behind the conclusions and discussion of the facts and assumptions relevant to the matter under advisement (a Covered Opinion), or

(2.) a very specific disclaimer that the taxpayer may not rely on the advisor’s correspondence to avoid penalties.

The first option (the covered opinion) is very burdensome and costly and unfortunately may apply to routine questions that in the past could be answered with a line or two of feedback from an accountant familiar with the taxpayer’s circumstances.

Without the second option (the disclaimer), simple written replies would become a thing of the past. With the disclaimer (and only with the disclaimer), we can continue to provide quick, accurate responses and also more lengthy analysis that merely does not rise to the level of the voluminous specifications required by the disclaimer-free correspondence.

In some cases, this lengthy analysis (and increased pages of support, time and fees) is necessary, but in most cases it is not, and we are forced to include the disclosure.

So, from this point forward, you will see the following disclaimer at the end of all our emails:

"IRS CIRCULAR 230 DISCLOSURE"

To ensure compliance with new requirements of the Internal Revenue Service, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication,including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

PLEASE BE NOTIFIED THAT OUR NORMAL LETTERS AND E-MAILS TO YOU ARE NOT INTENDED TO MEET THE “COVERED OPINION” TEST.

If you seek materials that do meet this test and thus may be relied upon for preventing federal tax penalties, please feel free to specifically request such.

More Disclaimers!