We have recently separated these services into a different suite. We primarily decided to do so, because of the recent changes in law affecting Lawyers, Certified Public Accountants, and Enrolled Agents advising on tax matters.
Who may need tax research and opinion letters?
Any business or personal transaction may lead to big or small tax consequences. Most of the situations and issues have certain established rules and are easily resolved. But quite often the complexity of a transaction or lack of certainty in the law may require further research by the tax adviser. If a client wants to use the results of the research to justify a tax position on audit and avoid possible accuracy related penalties, then an opinion letter is prepared for the client.
What are the recent changes and how do they impact the tax services?
Circular 230, the main document regulating the professional services of tax advisers, now calls for any written advice concerning any plan or arrangement, significant or principal purpose of which is the avoidance or evasion of any tax, to meet a number of stringent requirements as to its content and presentation. If written advice does not meet certain requirements, the tax payer will not be able to rely on it to avoid accuracy related penalties. There are also penalties for the advisers who do not provide the written opinions in the required format.
Intended primarily against the schemes abusing the tax system, these rules now affect every adviser who advises a taxpayer in writing about a legitimate tax minimization strategy or tax return position.
How clients are affected?
As a result, it became more expensive for the consumer and risky for the professional to write tax opinion letters even in seemingly harmless situations. Many accounting firms have chosen to give writing opinion letters. Our firm does write opinion letters on any subject of the United States income tax law. We are happy to work with other accounting firms on this as well.