n-08-11.pdf

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing.

This collection currently includes the publisher’s available advance-release directory. Historical bulletin renditions are discovered separately; an advance-release record alone does not certify the collection archive complete.

Part III – Administrative, Procedural, and Miscellaneous

CLARIFICATION OF NOTICE 2007-54 PROVIDING GUIDANCE AND
TRANSITIONAL RELIEF UNDER THE PREPARER PENALTY PROVISIONS OF
THE SMALL BUSINESS AND WORK OPPORTUNITY TAX ACT OF 2007

NOTICE 2008-11
This notice clarifies Notice 2007-54, 2007-27 I.R.B. 12, which provided
guidance and transitional relief for the tax return preparer penalty provisions
under section 6694 of the Internal Revenue Code, as amended by the Small
Business and Work Opportunity Tax Act of 2007.
BACKGROUND
The Small Business and Work Opportunity Tax Act of 2007 (the Act), Pub.
L. No. 110-28, 121 Stat. 190, was enacted on May 25, 2007. Section 8246 of the
Act amended several provisions of the Code to extend the application of the
income tax return preparer penalties to all tax return preparers, alter the
standards of conduct that must be met to avoid imposition of the penalties for
preparing a return which reflects an understatement of liability, and increase
applicable penalties. The amendments are effective for tax returns prepared
after the date of the enactment, May 25, 2007.
In order to provide sufficient time to address issues pertaining to the
implementation of the Act, the Treasury Department and the IRS issued Notice

2
2007-54 on June 11, 2007, and which provided the following transitional relief:
For income tax returns, amended returns, and refund claims, the standards set
forth under the previous law and current regulations under section 6694 will be
applied in determining whether the IRS will impose a penalty under section
6694(a), as amended by the Act. Notice 2007-54 provided that generally, in
applying transitional relief for income tax returns, amended returns or refund
claims, disclosure would be adequate if made on a Form 8275, Disclosure
Statement, or Form 8275-R, Regulation Disclosure Statement, attached to the
return, amended return, or refund claim, or pursuant to the annual revenue
procedure authorized in Treasury Regulation sections 1.6694-2(c)(3) and 1.6662-
4(f)(2).
Notice 2007-54 further provided that for all other returns, amended
returns, and claims for refund, including estate, gift, and generation-skipping
transfer tax returns, employment tax returns, and excise tax returns, the
reasonable basis standard set forth in the regulations issued under section 6662,
without regard to the disclosure requirements contained therein, will be applied in
determining whether the IRS will impose a penalty under section 6694(a).
Notice 2007-54 provided that the transitional relief applies to all returns,
amended returns, and refund claims due on or before December 31, 2007
(determined with regard to any extension of time for filing), and to 2007
employment and excise tax returns due on or before January 31, 2008. Notice
2007-54 also provided that no transitional relief was provided under section

3
6694(b) as transitional relief is not appropriate for tax return preparers who
exhibit willful or reckless conduct, regardless of the type of return prepared.
TRANSITIONAL RELIEF CLARIFICATIONS
Questions have arisen regarding the extent to which amended returns or
claims for refund qualify for transitional relief under Notice 2007-54. There is no
set due date for such returns and claims other than prior to the expiration of the
period proscribed by the applicable statute of limitations. The transitional relief
described in Notice 2007-54 applies to timely amended returns or claims for
refund (other than 2007 employment and excise tax returns) filed on or before
December 31, 2007, and to timely amended employment and excise tax returns
or claims for refund filed on or before January 31, 2008 .
Questions have arisen regarding the extent to which original tax returns
due on extension after December 31, 2007, but filed before December 31, 2007,
qualify for transitional relief. The transitional relief described in Notice 2007-54
applies to original returns (other than 2007 employment and excise tax returns)
filed on or before December 31, 2007, and to original employment and excise
returns filed on or before January 31, 2008.
Questions have also arisen regarding the extent to which advice rendered
by nonsigning preparers qualifies for transitional relief under Notice 2007-54.
The transitional relief described in Notice 2007-54, as clarified by this notice,
applies to nonsigning preparers for advice provided on or before December 31,
2007.

4
In future guidance, the Treasury Department and the IRS intend to provide
transitional rules to address amended returns filed after the expiration of the
transitional relief period described in Notice 2007-54 that relate to original returns
filed under previous law or during the transitional relief period, as clarified by this
notice.
EFFECTIVE DATE
This notice is effective as of May 25, 2007.
EFFECT ON OTHER DOCUMENTS
Notice 2007-54, 2007-27 I.R.B. 12, is clarified.
CONTACT INFORMATION
The principal authors of this notice are Matthew S. Cooper and Michael E.
Hara of the Office of the Associate Chief Counsel (Procedure and
Administration). For further information regarding this notice, contact Mr. Cooper
at (202) 622-4940 or Mr. Hara at (202) 622-4910 (not toll-free calls).