IRS enforcement

[quicksam]

Erchess,

As far as the student goes, we should be able to trust the information our client tells us unless they give us reason not to believe them. >What information about a parent claiming a student gives you reason not to believe your client.

We see a lot of 1099Misc that are handwritten in our area. Now if we see a handwritten W2, then a flag pops up.

These audits have nothing to do with the correctness of the return. It has everything to do with if the auditor thinks you ask enough questions to know the facts. The problem is the auditors can have very different opinions on just how good you have performed due diligence.

Erchess, If you require your clients to prove their children are students with the 1098, then you just as well go ahead and do a full blown audit on every question you ask them.

One of the questions that we are being told the auditors want you to ask is where are the parents if you are claiming a niece or nephew. I have no problem asking if the parents live in the house also, so I can make sure the appropriate person is claiming the EIC. However, how is it any of our business where that parent is if they do not actually live with the taxpayer and child.

One other thing, Erchess, these audits have nothing to do with the clients accounts. That is why the tax lawyer wasn't there. In fact, it is my understanding that they usually do not even cross reference the clients file if they find it wrong during your interview. This audit is all about you.

[quicksam]

Taxea,

It has nothing to do with what information the taxpayer is providing you. It is whether any information could possibly be incorrect. For example, the taxpayer provided the 1099Misc(handwritten) but was fined even though the taxpayer brought it in.

Nashville,

You are correct in your thinking. The Agents are not looking at the taxpayers returns for audit, they are only technically auditing your due diligence.

[OtisMozzetti]

EITC for those incarcerated?

Regarding the guy who went to prison, I was under the impression that spending one day in confinement during the taxable year made a person ineligible for the EIC. I have therefore always asked EIC Clients if they spent any time in confinement during the year but for some reason never had one who said they had. I now see that was wrong. I don't suppose the client in question was a Felon who lost his citizenship was he? I am sure most of us ask clients if they are citizens and if not whether they are here legally or illegally.

My understanding is that in many but not all states, felons lose the right to vote for at least some time, but I don't believe that they cease to have a "valid Social Security number" assuming they had one to begin with.

As I understand it, felony carries prison time of one year and up. Misdemeanors carry incarceration time of less than a year. It could be argued that the resulting absence is a "temporary absence" for misdemeanors and NOT A TEMPORARY absence for felony imprisonment. There is nothing I know of in the EITC rules (other than 2/10 year disqualification for falsely claiming EITC) which disqualifies those convicted of crimes other than a considerably more difficult hurdle satisfying the residency requirement to have a qualifying child.