Increase on preparers due diligence failure for EIC credit

[Burke]

The auditor wanted back up for both income and expenses.He never would answer what back up we should have.

This interests me. Another preparer said he asks for all the bank accts for a cash reconciliation. What are others' asking for, whether it is a Sche C, 1065 or 1120S?

[MLINDER42]

Eic Due Diligence

During audit was told that the signature on the 8867 was the only way you could prove you asked the questions.in 2012 the form has to be e-filed with the return.Don't see how that does any good but to make sure it is filled out which we always did.

[clr]

Signatue 8867

Here is a draft copy of the new 8867. There is no signature line?????\

http://www.irs.gov/pub/irs-dft/f8867--dft.pdf

[MLINDER42]

Eic Due Diligence

They do not have a place to sign but if you are audited you need proof that you asked the questions.Having the client sign on the bottom or some other form with the questions on it is the only proof they will accept.

[FEDUKE404]

Sign on the invisible line?

They do not have a place to sign but if you are audited you need proof that you asked the questions.Having the client sign on the bottom or some other form with the questions on it is the only proof they will accept.

That sounds absolutely ridiculous (the IRS signature requirement with existing form).

Assuming the Form 8867 remains as a draft form, do you think the IRS may (quickly!) redesign the form so that it can be signed??

FE

[S T]

Software

In 2009 and 2010, for form 8867 -EIC Due Diligence, from my software, I could print out a signature form, that stated Taxpayer Name ssn# , "by signing below, I verify that the above information was provided by me and is true and accurate to the best of my knowledge."

The above information I would enter in the computer screen, such as "verified Schedule C income, birthdate, dependents, etc whatever I needed the t/p to verify.

For efiled clients, this was included in the signature package with the bank account verification, and forms 8879, and I have that signature form in file - even though it is not transmitted via efile with the return.

Not sure how my software is going to handle for the 2011 filings completed in 2012.

Sandy

[clr]

Signature

In that case why not just have them sign the 1040 or 1040a. This would cover the whole return.

[AccTaxMan]

This interests me. Another preparer said he asks for all the bank accts for a cash reconciliation. What are others' asking for, whether it is a Sche C, 1065 or 1120S?

Does that mean we should ask for all the bank accts and do a cash reconciliation for each EITC client who has a Schedule C??

[AccTaxMan]

For efiled clients, this was included in the signature package with the bank account verification, and forms 8879, and I have that signature form in file - even though it is not transmitted via efile with the return.

Not sure how my software is going to handle for the 2011 filings completed in 2012.

Sandy

Sandy, what is the "bank account verification" that you are talking about there?

[S T]

Software

My software prints out "Bank Account Verification" that I have the client review and sign to ensure it has the correct information for Direct Deposit.

Sandy

[WhiteOleander]

Does that mean we should ask for all the bank accts and do a cash reconciliation for each EITC client who has a Schedule C??

A lot of my clients don't even have bank accounts.

[JohnH]

Yes, we are expected to audit every EITC return and keep workpapers. The IRS considers tax preparers to be the "first line of defense" against taxpayer fraud.

From here: http://www.irs.gov/newsroom/article/...206382,00.html

snip from "Prepared Remarks of Doug Shulman, Commissioner of Internal Revenue, Before the National Press Club on April 13, 2009:

"I believe the IRS has to do a better job working with the tax preparer community and making them part of our overall compliance strategy. They can be our first line of defense against non-compliance and stop a small problem from becoming a big one."

The camel's head is firmly entrenched in the tent, and the rest of the body is well on its way...

[FEDUKE404]

Extra signature documents

My software prints out "Bank Account Verification" that I have the client review and sign to ensure it has the correct information for Direct Deposit.

Sandy

Not knowing what software Sandy uses, my guess is this "Bank Account Verification" form has nothing to do with official government tax documents but is merely a CYA document generated by the tax-preparation software.

I have a MS Word document, created by moi, that basically shows the bank's name/RTN/DAN along with the relevant deposit and/or debit details. The form is stapled to the Form 8879, sent to the client, and returned to me prior to any efile transmittal. Regardless of what I already have on file, in a pro forma/questionnaire, or wherever -- THAT is the information I use when the return is efiled.

Guess I will need to come up with something similar for the EITC folks...although I did a grand total of one EITC tax return last season.

QUESTION: Is it appropriate to add a surcharge to client bills to cover any extra "paperwork" for the EITC situation??

FE

[taxxcpa]

Guess I will need to come up with something similar for the EITC folks...although I did a grand total of one EITC tax return last season.

QUESTION: Is it appropriate to add a surcharge to client bills to cover any extra "paperwork" for the EITC situation??

FE

I think you should add the amount of their EIC to your fee. Then they would have no motive to cheat (but you would).

[Nashville]

Industry Organizations

If I have to audit a client, I will quit. I don't have that many to begin with. Sometimes I have a normally prosperous proprietor who will have a bad year and receive EIC.

On January 1, Medicare payments to doctors is scheduled to drop by almost 30%. It will be interesting to watch how the AMA responds to this. My guess is that almost all doctors will refuse to take medicare patients.

Where is the "AMA" for our industry? and what are they doing?

What would happen if all tax preparers stopped preparing returns with EIC? I don't have a problem with due diligence, but I know of several situations where fraud was actually turned in and then the IRS did absolutely nothing. And this talk of tax preparers being "the first line of defense" against EIC fraud?

IRS is doing this to avoid pursuit of the cheats. That crowd is for the most part judgement proof. The best way to stop them is to deny them all future EIC.

Would be good to hear from some of our board members who are with HRB, JH, or Liberty, and how they plan to handle this. Their offices are overrun with EIC recipients as soon as W-2s are available, and I'm certain they are not planning to refuse preparation for that group.