Increase on preparers due diligence failure for EIC credit

[S T]

Diy

Gary2,
Well noted on the "DIY" (not being part of the paid preparer group) but don't you think that there should be some form that the "DIY" people need to file as well to substantiante their EITC Claim

I guess what concerns me and irritates me - is that we (most of us) know the EITC regulations and due diligence - but IRS is going to penalize us - for due diligence, but there does not seem to be any effort to penalize "others" including the DIY people or preparers that are not signing the returns. And as if the PTIN and other registrations are going to Stop the so-called preparer people that are not registering.

What is the current penalty - a taxpayer that is caught in fraud of EITC can not claim that credit for 10 years??? IRS estimates that somewhere between 23 - 28 percent of EITC claims are paid in error! Is IRS even bothering to note those returns and investigate, when it is easier to "track us down - as in Registered Professionals"

Seems like any preparer of EITC returns will be at risk of investigation, penalties, etc. and that will only be the preparer or office that actually signs the tax forms.

Granted there have been more "preparers" or others that have been found and brought before the DOJ or States - but I do not want IRS in my office!

Sandy

[Gary2]

Irs can ask all of the store fronts and the "DIY people" to complete the form and remit with the tax returns.

The DIY people don't have to file it, unless there's some new meaning for "Paid Preparer's ... Checklist" that I don't know about.

It strikes me that the preparers who are most worried about the scrutiny and possible penalties are the ones least likely to be hit with them. Seriously, the IRS doesn't expect you to contact every town hall in the country just to be sure your client was never married.

[JohnH]

I think I prepared 3 or 4 returns with some EITC on them. Next year it will probably be none. I agree with FE and Sandy - just not worth the hassle and associated risk.

[S T]

Eitc

Fortunately for me, all of my clients are referrals or long time clients - so I have the "picture in hand" pretty quick.

I "almost" NEVER file a return with EITC on it - and guess that is probably going to go to "zero returns" now with this "Due Diligence proposal"

A lot of us thought the FTHB Credit or Adoption Credit was bad enough - - but I am not going to participate in the "EITC" Group and be under scruntiny! Now the IRS wants us to E-file or attach the paperwork (before we were required only to keep in file" - I can't charge enough to go through these "hoops" and be subjected to scruntiny and possible penalties or fines later.

The IRS issued proposed regulations that would require paid tax return preparers, beginning in 2012, to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC). It is the same form that is currently required to be completed and retained in a preparer’s records.

Irs can ask all of the store fronts and the "DIY people" to complete the form and remit with the tax returns.

I know we have some people on this board that have already been through some "auditing" on EITC - Good Luck!

I am just not willing to participate!

Sandy

[FEDUKE404]

About the EITC

The preparer can use all proper due diligence and the EITC credit is often still fraudulent.

There is only so much a preparer can do (essentially asking the proper questions) without directly accusing the client of some.....untruthfulness.

Having several years ago worked part-time at a brand-name tax operation (I knew the owners), I have seen all of the tricks. Rest assured there are many (not quite most...yet!) who know exactly what to say and how to say it in order to milk the EITC cow. (I found it truly amazing several years back when so many foster children magically became blood relatives!!) They know where the "sweet spot" is....gotta have some income but "not too much." (I even had cases where I explained to them why their EITC was lower....wages had gone up scenario....and they would just grab a W2 (or 1099!) and say let's forget that one. Yeah, we quit then....but they were ready for "round 2" with someone else.) There are certainly more than enough "relatives" around to find the needed names and Social Security numbers.

I even had one teenager to walk in with a folded piece of notebook paper bearing a few numbers. She had been "baking cookies" and had just enough income to get into the early ranges of the EITC. When it was obvious her "plan" was a bit shaky (even a Sch C-EZ does have a few necessary questions), she exited the office.

The other aspect that really galled me was that virtually all of these "time for my annual guvment check" folks would use RALs, and frequently also the "instant cash" option to get an immediate check, and then walk across the parking lot to the check cashing place. Not a problem...no real money out of their pockets!

Time to move on...my blood pressure is rising....

FE

[Jesse]

Congress passed the Korea trade agreement on October 12, along with agreements with Colombia (HR 3078) and Panama (HR 3079), which the president also signed on Friday.

The free trade agreement with South Korea raises the penalty on tax preparers who fail to do the necessary due diligence on earned income tax credit filers to $500 from $100, for returns that must be filed after December 31, 2011.