An important alert for tax practitioners: Last week, the AICPA urged the Treasury Department and the IRS to grant transitional relief for the “more-likely-than-not” provision that is included in the recently passed “Small Business and Work Opportunity Tax Act of 2007.”

The agencies apparently were listening.

The IRS and the Treasury Department have released a notice that provides “guidance and transitional relief for the return preparer penalty provisions amended” by the tax law.

According to the IRS, the transitional relief “will apply to all returns, amended returns and refund claims due on or before Dec. 31, 2007, including those returns, amended returns and refund claims filed pursuant to extensions to file due on or before Dec. 31, 2007; to 2007 estimated tax returns due on or before Jan. 15, 2008; and to 2007 employment and excise tax returns due on or before Jan. 31, 2008.”

Part of a larger Iraq war funding bill, the tax act includes a revision of section 6694 of the Internal Revenue Code. The revision stipulated that the more-likely-than-not provision was to have been effective for returns prepared after the date of enactment, which was May 25, 2007. The AICPA had claimed that the transitional relief was “urgent” in order to “avoid extreme inequity, uncertainty and administrative burden.” The AICPA’s request also cited the “impending June 15 filing deadline for certain fiscal year filers and the lead time needed for e-filing.”