SERVICE ANNOUNCES PROCEDURE FOR TRUST RETURN PREPARERS TO AVOID PENALTY IMPOSED FOR FAILURE TO MANUALLY SIGN RETURNS.

Notice 88-48

It has come to the attention of the Internal Revenue Service that the enactment of new section 645 of the Internal Revenue Code which is effective for taxable years beginning after December 31, 1986, may result in the imposition of special hardships on preparers of Forms 1041, U.S. Fiduciary Income Tax Returns. Section 645 of the Code, added by section 1403(a) of the Tax Reform Act of 1986, requires trusts, with certain limited exceptions, to use a calendar taxable year. Section 6695(b) of the Code provides that income tax return preparers who are required by regulations to sign returns or claims for refund prepared by them and fail to do so, shall pay a penalty of $25.00 for each such failure unless the failure is due to reasonable cause. Section 1.6695-1(b)(1) of the Income Tax Regulations generally provides that, income tax return preparers must manually sign returns or claims for refund prepared by them. Thus, most Forms 1041 must now be filed by April 15, plus extensions, and the requirement to manually sign each return at that time creates hardships for income tax return preparers responsible for the preparation of large numbers of such returns.

In order to alleviate these hardships, the Service will not assert against a preparer of 1987 Forms 1041 the section 6695(b) penalty for failure to sign a return provided the preparer uses a facsimile signature in signing the returns and meets the following conditions:

(1) the preparer submits to the Service with the Forms 1041 bearing the preparer's facsimile signature, a letter manually signed by the preparer (a) listing the taxpayer name and identification number shown on each Form 1041 bearing the facsimile signature, and (b) containing a declaration, under penalties of perjury, that the facsimile signature appearing on each return is the signature used by the preparer to sign the return;

(2) after the facsimile signature is affixed, no person other than the preparer may alter any entries on the Form 1041 other than to correct arithmetical errors discernible on the return; and

(3) (a) the employer of the preparer, or (b) the partnership in which the preparer is a member or (c) the preparer (if neither (a) nor (b) applies), retains and makes available, upon request by the Service, a manually signed copy of the letter submitted to the Service with the returns and a record of any arithmetical errors corrected.

The Service will consider amending the regulations under section 6695(b) of the Code to permit the use of facsimile signatures by preparers of Forms 1041.

This document serves as an "administrative pronouncement" as that term is described in section 1.6661-3(b)(2) of the regulations and may be relied upon to the same extent as a revenue ruling or revenue procedure. See Rev. Rul. 87-138, 1987-52 I.R.B. 17.

DRAFTING INFORMATION

The principal author of this notice is Stan Michaels of the Individual Tax Division. For further information regarding this notice, contact him on (202) 566-3626 (not a toll-free call).