FTHB Credit

[GRich0656]

If still unclear about the relationship status, why not call the Practioner Hotline, get the name and ID number of the person responding. I know this will not clear you of any penalty liability, but would show diligence.

Next, when filing the return, disclose that client bought the house from his aunt, and that according to instructions and advice from the hotline, he is entitled to receive the FTHC.

Finally, as others have stated, explicitly state in engagement letter to client that this credit is based on new tax law that has not be fully tested in the tax courts and that, should the IRS rule he is not entitled to the FTHC, he will be responsible for repayment along with penalties and interest.

I think this return would justify more than a $100 fee given all that you will have to do in order to cover your and your client's behind.

[Black Bart]

Yes, but

Using the same philosophy every one of my clients that receives EITC and later has an audit and must pay it back could hold me responsible.I could never do one of these returns which is most of my clients.

EITC has been around for years and years and while most of my clients don't get it, I've still done hundreds, the kinks are worked out, and I feel comfortable with them. Although I have to say, I've worried more about EITCs since they started getting up around $5K or so.

The FTHB credit is something new, there's no case law, I've never done one, and there are many "iffy" scenarios (check the past few months FTHB threads on this board to get a whiff) that posters think might develop; maybe a problem, maybe not (and not just relationship issues). As I said previously, I think many preparers out there wish they had not done the $7,500 credit because of flak from clients.

I'm just sayin' I think it's risky -- a lawyer once told me most lawsuits are a surprise and I no longer expect angry clients to necessarily be reasonable. But still and again, if you're not worried then have at it.

[Edsel]

EIC Penalties

Congress does not want IRS to go after fraudulent EIC returns. I have this first hand from one of our congressmen, plus the results of a couple whistleblowing incidents from a friend of mine. They view the EIC as an excellent "transfer of wealth" vehicle. They DO expect the preparers to all their dirty work when the return is prepared.

Witness: one of our board members was audited for 25 EIC returns. He was penalized $100 apiece for 3 returns (one of whom they said the preparer should have known the t/p was in jail). After penalizing the preparer $300, the IRS wouldn't even go after the fraudulent money paid to the taxpayers.

[JohnH]

That follows the general concept that it's easier & much more profitable for government to enforce the law against law-abiding citizens. They will pay up because they have something to lose, whereas the criminals usually have little at stake.