IRS enforcement

[thomtax]

This email was just received through the IRS quickalerts:

"ATTN: Authorized IRS e-file Providers/EROs

IRS is using a multi-prong approach to reduce erroneous EITC claims. Agents
and criminal investigators will visit paid preparers identified as filing
highly questionable EITC claims to discuss remedies, responsibilities and
possible civil/criminal penalties. Agents also will conduct traditional
onsite compliance reviews of EITC due diligence records.

----------
This has been an IRS e-file QuickAlert "

It looks as if the IRS will not be playing nice this year.

LT

[erchess]

Due Diligence

Preparers who do their Due Diligence have nothing to fear.

[Mike Mac]

Curious

I have not gotten that "Quick-Alert" yet. I was always under the assumption IRS used the shotgun approach and sent the same message out to all of us.

Should I feel hurt, neglegted, ignored or just feel happy they missed me!!

Mike

[thomtax]

I have not gotten that "Quick-Alert" yet. I was always under the assumption IRS used the shotgun approach and sent the same message out to all of us.

Should I feel hurt, neglegted, ignored or just feel happy they missed me!!

Mike

Oh-no. They have obviously singled you out to hide the information from so that it will be a surprise when they show up. (Just kidding)

It probably has to do with service providers. I have two different ones and sometimes there is several hours difference in times received when they were sent at the same time.

erchess- Not to me. I will not have any problem satisfying them, but it will take time and trouble when I could be putting it to much better, and more entertaining uses, such as watching the paint dry on the wall.:-) As I tell my customers, even if you can provide everything needed and they agree with you, you still have to take time, trouble and maybe pay postage to satisfy them, so let's try to head that off up front. And remember, most of the criminal investigators have such an entertaining and funny sense of humor.

LT

[ChEAr$]

Actually

this isn't new. IRS has been doing this in years past. I suspect they're just reminding us
to be on our best behavior.

[taxea]

thom...Erchess is right...they are going after the preparers that obviously don't engage in due diligence. If you do you probably will not be visited. taxea

[S T]

IRS e-News 2009-1

The IRS e-News 2009-1 just arrived and here is a link to the EITC compliance

http://www.irs.gov/individuals/article/0,,id=179024,00.html

Sandy

[quicksam]

Don't be so sure!

I have a friend that just went thru one of these audits, and it is nothing like you think it is.

They have been doing compliance audits for years, but this is different than a compliance audit. This audit is just concerning your due diligence.

They come with 25 preselected returns. Thats right I said they. There are two of them. One goes thru the returns while the other gives you a four hour intense interview on EIC. No problem. Well read on.

My friend was charged $100 on a total of 3 of the 25 returns. Total fine $300.
Fine #1
Father claiming son who is 19 and a student. IRS said that no school issued student 1098. They charged $100 because they did not get copy of report card or some other proof.

Fine #2
Father claiming 2 kids with same last name and claimed HOH. The IRS agent stated that their records showed the taxpayer was incarcerated for more than half of the year so he could not have been HOH. Fined $100.

Fine #3
Woman came in with handwritten 1099misc and filed Schedule C. The IRS said the payers name on the 1099misc never filed a copy with the IRS. The IRS concluded that the 1099misc could be fraudelent.
Fined $100

Now in all three of these scenarios, I can not think of many ways a lot of us would have filed them any different. The IRS is using information that we do not have on hand to penalize us. I thought the knowledge requirement was for issues that gave us some reason to believe the information given. For example, a 22 year old claiming a 15 year old as his son. That in itself gives us reason to ask more questions. However in the examples above, I see no reason why you shouldn't have been able to rely on the word of your client. The only way to catch any of this kind of stuff is to begin requiring proof from all of your clients. In essence your are auditing them if you have to have proof for everything they are telling you.

[erchess]

quicksam

First of all, why did your client let the IRS agents in the door without an appointment attended by his tax lawyer??

Second, I have questions about each of the clients.

1. If your friend accepted the notion that a 19 year old was a student without seeing and keeping a copy of a F 1098 then he is a fool.

2. I can see questioning the fine on this one. With whom else did the kids make their home? Your friend's lawyer could, I suspect, have made this one go away.

3. Did your friend not think that a hand done 1099 is unusual? It should at the least have been marked as nonstandard in your friend's software. Frankly I would have either sent this client packing or called the maker and offered to prepare and file a proper form.

[Corduroy Frog]

I agree

Now in all three of these scenarios, I can not think of many ways a lot of us would have filed them any different.

Quicksam, don't be intimidated by some of us who feel you need to go out and hire a lawyer just to go through an audit.

We are not supposed to be auditing these clients, and I think two of the above penalties are out-of-line. No way a preparer can know whether his client has been in the slammer or not. No way a preparer can know about a full-time student without the 1098-T. Just because student was not issued a 1098T doesn't mean dependent was not a FT student, especially when you consider the track record of the colleges and universities in filling these things out.

I do believe there are situations where you cannot e-file or take EIC, and they include visually questionable 1099s and W-2s. Of course, if they have our software, they can print as many phony 1099s, W-2s as they choose. But I do believe a hand-written 1099 deserves a penalty.

More IRS trying to convert us to auditors, although they claim differently. "Due diligence" means going deeper, and I agree that we should do so if given a reason to suspect something is not right. A 25-year man with an 18-year old natural son is different than assuming all your clients have been in jail.

[OtisMozzetti]

Protect Yourself by Documenting Thorough Interview

It seems to me that the way to protect oneself is to document what questions were asked the taxpayer and what answers the taxpayer furnished. Plus, if the situation looks irregular, help the client to understand that it may be necessary to subsequently furnish proof in order to stay out of trouble with the IRS.

========
Also, if Miss Stinker spent 7 months in the county jail, while her relative or friend stayed over supervising the Stinker's kids, isn't it entirely possible that Miss Stinker really did qualify as a head of household since she was only "temporarily absent" from the place of abode?

[Zee]

First of all, why did your client let the IRS agents in the door without an appointment attended by his tax lawyer??

Second, I have questions about each of the clients.

1. If your friend accepted the notion that a 19 year old was a student without seeing and keeping a copy of a F 1098 then he is a fool.

2. I can see questioning the fine on this one. With whom else did the kids make their home? Your friend's lawyer could, I suspect, have made this one go away.

3. Did your friend not think that a hand done 1099 is unusual? It should at the least have been marked as nonstandard in your friend's software. Frankly I would have either sent this client packing or called the maker and offered to prepare and file a proper form.

Four hours with a tax attorney at your side would cost a whole lot more than $300.

I'd bet the majority of tax preparers don't ask to see a student's F1098.

I agree on #3, and wouldn't accept the handwritten 1099 unless further investigated and substantiated.

I wonder what the appeal process is for such fines?

[tpert]

First of all, why did your client let the IRS agents in the door without an appointment attended by his tax lawyer??

Second, I have questions about each of the clients.

1. If your friend accepted the notion that a 19 year old was a student without seeing and keeping a copy of a F 1098 then he is a fool.

2. I can see questioning the fine on this one. With whom else did the kids make their home? Your friend's lawyer could, I suspect, have made this one go away.

3. Did your friend not think that a hand done 1099 is unusual? It should at the least have been marked as nonstandard in your friend's software. Frankly I would have either sent this client packing or called the maker and offered to prepare and file a proper form.

From what I have heard, it may be that the fine for #2 had nothing to with actual eligibility for the credit but the fact that due diligence was not followed and the tax preparer did not note that the man was temporarily absent with a qualified temporary absense. Is that what the fine might have been for?

Regarding a Form 1098 for a 19 year old in #1. I have never heard that a 19 year old must be in an education facility that issues Form 1098. Couldn't he have been in high school? As I understand it, he could be a full time student attending any non-profit organization that meets this definition:

an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on

Not all of these issue Form 1098. Please correct me if I am wrong.

[equinecpa]

I agree on #3, and wouldn't accept the handwritten 1099 unless further investigated and substantiated.

I'm surprised at the consensus on this. I have quite a few clients who only need to prepare approximately 1 or 2 1099's -they do them by hand every year. Beats buying forms or trying to line up a printer. In the time it takes to do either one of those tasks, the 1099's are done.

I would not second guess a handwritten 1099 unless it was issued by a company that I knew would print them and not do them by hand.

I feel for this tax preparer - I would not have acted differently in any case. And yes for $300.00 no point hiring an attorney, and probably not even worthwhile appealing (though be sure I would be talking to the auditors supervisor and disputing the fine -worthwhile or not, I would be standing up for myself!).

[Nashville]

Pursuit of Taxpayer

My friend was charged $100 on a total of 3 of the 25 returns. Total fine $300.

QuickSam, if you're still out there, can you call up your friend and ask what the IRS actually did with the taxpayer? My guess is they did nothing, and the entire exercise was to penalize the preparer. If irregularities were found, my guess is that they referred them back to another IRS office out of the meanstream of compliance auditing, and that the IRS office did absolutely nothing to collect the tax from the taxpayer.

This burns me up. They let rampant EIC abuse go unhindered (and have been pressured to do so by Congress). But then they come back on the preparers because we haven't audited them.

Lack of a 1098 from a college? I would have asked a question, but if the taxpayer told me the school didn't send him one, this is just as believable as not, given the track record of the 1098 documentation from colleges and universities.

A client in jail? Would I have asked this question? Absolutely not.

A handwritten 1099? Would I have asked the question? Yes, because of the tons of caution language the IRS has issued on the subject. For example, we are not permitted to e-file a home-made W-2 or 1099. But the classic package of W-2s and 1099s sold at the omnipresent kiosks in Office Max or Office Depot contains software that will print out a fresh-and-official W-2 or 1099 for some $20 or thereabouts.

Time to chase down the cheaters and liars and get back the thousands they have stolen, and make THEIR life miserable instead of coming after preparers because they haven't researched the family tree of all clients.