July 2, 2005 / Publications
Welcome To The Brave New World Of Tax Practice
In 2005, sweeping federal regulations became effective which establish new standards for professionals who practice before the Internal Revenue Service. Unfortunately, this Firm, like all other law firms that render tax advice in the ordinary course of their practices, is subject to these new regulations.
Regulations have caused a major change in the practice of tax law by requiring certain written tax advice to comply with detailed standards which, until now, were only applicable to certain formal written tax opinions. Unfortunately, the regulations are unclear as to which communications between attorney and client will be subject to the new standards.
Compliance with the regulations in all of our written client communications which may be deemed to contain tax advice is not only impractical in the real world, but would subject our clients to needless and unacceptably high legal fees. Fortunately, the regulations provide a loophole. All written communications which contain the following caveat are exempt from the new requirements:
PURSUANT TO APPLICABLE FEDERAL REGULATIONS WE ARE REQUIRED TO INFORM YOU THAT ANY ADVICE CONTAINED IN THIS COMMUNICATION IS NOT INTENDED TO BE USED NOR CAN IT BE USED FOR PURPOSES OF: (1) AVOIDING TAX PENALTIES OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR MATTER ADDRESSED HEREIN
We hope that future federal regulations will exempt most of our written client communications from the new standards. Until then, you will be seeing the above caveat in most of our written communications, including letters, memorandums, faxes and e-mails. We regret that we must subject you, our valued clients, to such a formal communication and to its implications. However, we have no alternative if we are to continue to continue to provide quality legal services at an acceptable cost to our clients.
Under the appropriate circumstances, at a client’s specific request, the Firm can provide a formal written opinion which complies with the new standards and which may provide protection from tax penalties. Each such engagement would be subject to a separate engagement letter between the client and the Firm. Fees for such an opinion would be commensurate with the scope of the opinion and the complexity of the issues involved.
If you have any questions concerning our new practices, please feel free to contact a member of the Firm. Welcome to the brave new world of tax practice.