Letter Ruling 8016099, January 25, 1980
Uniform Issue List No. not available



This is in response to your ruling request of October 22, 1979, as amended by your letter of December 3, 1979. The amended ruling requested is that a partner of X will not be required to sign the income tax returns that it prepares in the following situation.



X is a partnership that has entered into an agreement with Y to prepare income tax returns for Y's clients on a sub-contract basis. Y will submit the data for their clients income tax returns to X. X will not audit or otherwise verify the data submitted, although they may request clarification. Any questions X has will be directed to Y and not their clients. X will use their judgment in resolving questions where the law is unclear, or where there may be conflicts between the taxing authorities' interpretation of the law and what seems to be other supportable positions. Unless otherwise instructed by Y, X will resolve such questions in favor of the client if there is reasonable justification for the position taken. However, X will review these areas with Y prior to completion of the returns. Y will assume overall responsibility for the returns including signing them and presenting them to the taxpayers.



Section 1.6695-1(b)(1) of the Income Tax Regulations states that an individual who is an income tax return preparer with respect to a return of tax under subtitle A of the Internal Revenue Code of 1954 shall manually sign the return (which may be a photocopy) in the appropriate space provided on the return after it is completed and before it is presented to the taxpayer (or nontaxable entity) for signature.



Section 1.6695-1(b)(2) of the Regulations provides that if more than one income tax return preparer is involved in the preparation of the return, the individual preparer who has the primary responsibility as between or among the preparers for the overall substantive accuracy of the preparation of such return shall be considered to be the income tax return preparer for purposes of this paragraph.



Although the returns are prepared by X, a partner of X is not responsible for the overall substantive accuracy of the returns because, prior to completion, questionable entries on the returns are discussed with Y and, after completion, the returns are submitted to Y for final review.



Accordingly, it is not the responsibility of one of the partners of X to sign the returns. However, since the partner of X is an income tax return preparer, the partner may be subject, in appropriate situations, to the penalties under section 6694 of the Code for neglect or intentional disregard of rules and regulations or for willful understatement of tax liability.



Richard L. Crain