EIC manipulation

[ChEAr$]

The IRS can't have it both ways. Either they always have to accept mileage if no record is available or they won't. They cannot say it's an exception for EIC.

Interesting idea there. But after years in the game, you'll find that when you're playing
poker with IRS, somehow, you never get dealt any aces? if it's Bridge, you just never
seem to have any trump cards, either. (grin

My point is that if EIC is not involved in an audit situation, IRS will disallow any mileage
allowance in the absence of good proof, usually predicated on records.

But in an EIC situation they will take the opposite tack. And win.

[Nashville]

Time to Quit

Yes, they can win.

But if they penalize me for disallowing mileage deduction because client didn't have a log, because in this case it works to their disadvantage, it's time for me to get out of the business. And they can't stop me from doing that.

And the client will buy TurboTax the next year, and take enough deductions to maximize his EIC and then stop entering deductions. If IRS catches this, how are they going to go after the preparer after running him out of business? Remember, they're not going after EIC recipients, only preparers.

Celebrate your big "win", IRS. At least you had someone working the return who would be consistent and not even LOOK at his EIC level until all expenses had been taken.

Go to your CPE classes and look around, guys and gals. All you see are old curmudgeons like me and Harlan. How many young people are even considering getting into the tax preparation business nowadays?

[JohnH]

I agree with Harlan & NYEA- IRS can have it both ways. It's that classic example of the results of an audit being an assessment large enough to hurt but not enough at stake to justify fighting it. If IRS changes the return and the taxpayer has to pay, then the taxpayer claiming EIC probably can't afford to pay you to continue the battle, especially since you won't win anyhow.

I also agree with Nashville's "old crudmudgeon" comment, mainly because I'm one as well.

[BHoffman]

You guys raise interesting points. Here's my take.

Young tax preparers are employed by others, getting their experience. That's why I think we don't see many of them attending CPE classes. Their boss (the old guy or gal) goes to these classes because she or he is the one who signs the returns. I think the youngsters are busy at the office, cranking out those billable hours.

I also think much of the hoopla regarding IRS scrutiny of tax preparers may be actually in response to the awful ACORN videos that emerged over the summer.

ACORN was very involved in the VITA program, and gauged its success by the amount of EIC and CTC monies it garnered for its clientele:

http://www.docstoc.com/docs/13133773/ACORN-Tax-and-Benefits-Access-Centers

The IRS unintentionally taught some very bad apples how to commit fraud using the EITC and the CTC through its VITA training program. The government funded the fraud through its VITA grant program. ACORN was the IRS' third largest VITA partner. Ooops.

IRS has since stopped partnering with ACORN in regards to VITA. This doesn't mean that ACORN or one of its many tentacle affiliates will stop preparing bogus tax returns, but it does remove the immunity that the VITA program provides to its volunteer preparers.

http://www.webcpa.com/news/IRS-Leaves-ACORN-Off-VITA-Grant-List-52414-1.html

The unintended consequences will probably be that some very good tax preparers will decide to retire earlier. Some young people will turn away from careers in tax. Some preparers, like me, will refuse to prepare EIC returns. The truly evil and the misguided social-activist preparers will certainly find their way around any additional scrutiny.

And unless you are doing very bad things, I wouldn't worry too much about the IRS. If they want to level additional scrutiny at honest preparers, and you don't think the pain-in-the-neck of a "friendly, educational visit" is worth it, then just stop preparing EIC tax returns. If EIC returns make up a good bulk of your business, then look at the "friendly visit" as just another (potential) cost of doing business.

[Kram BergGold]

Another appoach

First, I believe the taxpayer has to report all expenses. That said, if I wanted to minimize an auto deduction I would have the client produce a reconstructed log. My instructions on creating this log would be, "only include those miles you can prove with date book entries or store receipts etc". If there is travel involved you could take the lesser of actual meal receipts or the per diems. Don't expense equipment but depreciate it.