Tax Preparers Changes & Scrutiny

[rfk]

Fellow Board Members,

How is every one feeling about what I call the "dump" onto the tax preparers where there are potential penalties for literally messing up if we don't watch ourselves. I am getting to the point where I am not sure whether I want to continue doing tax returns for fear of examination by the IRS of my work - although I try my darnest to do everything right, and I am VERY careful. I just get worried of the continued "changes" that occur with us involved, where we play tax cops for the IRS (not that my work is perfect; I am only human).

What do you folks think about the transition occurring or am I seeing this wrong? I am starting to think about being very choosy of the tax returns I do even though they may be correct in its content. I just do know where this is going.

Thanks for your input if any wish; this has probably already been thrown around but I did not want to search the forum.

rfk

[ChEAr$]

I think you've been to too many seminars where a speaker quoting sec 7216, the new EIC rules, etc etc ad adsurdia, tells us the sky is falling and our licenses are in danger of being rescinded at any moment. In short, such a speaker is spewing paranoia.

Strange as it might seem, we are just as human as IRS people. or maybe it's the other way around. I don't know.

Nothing I say is to be taken personally of course and we are not bad people if we happen to choose the wrong amortization period or even mis add a figure.

So let's relax and enjoy the good years we have left in this crazy game.

Tha's my 27 cents worth. (used to be 2 cents before inflation.)

[erchess]

I am somewhat concerned

I don't like the idea of having to audit my clients even to a limited extent but I'm nowhere near thinking of finding another line of work or retiring. Let's look at it this way. We have always been subject to a penalty if we made a mistake that could be proven from the return itself or if we engaged in fraud. But there are some fairly new warnings we need to be aware of.

We had better be able to prove that we asked ALL RELEVANT QUESTIONS and got the right answers before we give anyone the EIC. To help us remember that, a copy of the questions and answers now goes in with the return. It's probably a good idea to ask each client to read and sign our file copy of that document.

We need to see the receipts for charitable contributions and the mileage logs for taxpayers reporting mileage. We need to make sure that our tick marks in answer to the questions about evidence and written evidence refer only to evidence we have seen.

Except for sending in the EIC questions and answers none of this is new. Am I missing something?

[JG EA]

....

We need to see the receipts for charitable contributions and the mileage logs for taxpayers reporting mileage. ...

Perhaps this is why so many are worried. We repeat these things when they are not required. I know there are times when you and I feel the need to "see" things because of that taxpayer, And I am secretly happy when clients volunteer their receipts from the churches - but we are not required to see them. I'm not trying to sound picky, but I think we need to ease up a bit on ourselves.

[Burke]

I, too, feel the heavy hand of the IRS further leaning on the preparers to be their first line of review for taxpayers, especially with budget cutbacks. It has even been stated as such by the government higher ups. I think we all have internal radar about certain situations. We just can't ignore them any more. Vague dissemenations such as "due diligence" can cover a lot of ground.

[geekgirldany]

I believe if we prepare the returns correctly and know what we should in regards to numbers provided for either charitable contributions, mileage, etc. then there should be no fear if a client gets audited.

My engagement letter that I have signed every year states that the client must have the receipts, mileage logs, etc to backup any information they have provided me and I will not audit such numbers. It all falls on them. Now with that being said I still have to watch. I know when someone is pulling one on me by looking at the numbers. If the numbers don't look right then I will ask for backup. I found one client paying his boat payment and classifying it as auto expense in QBs. There are always accounts I look at with new or even existing clients.

It is not really us that should be worried about playing IRS cop. Our clients need to get it through their thick heads that we are not going to bend IRS regs so much that they break.

I had a client the other day wanting me to classify a distribution as anything else. He said "I will take the risk of it not being classified as a distribution". I told him it was a distribution or he can consider it payroll and pay tax on it.

A new client this year had never paid himself a payroll because accountant told him he did not make enough to do one. Well he did and he was taking it as distributions. I told him if he did not setup to pay himself payroll this year then I would not prepare his S-Corp again. I prepared 2010 but he never came back for preparation of past due sales tax returns and I suppose he won't be back.

It is things like the above we all have to keep watch on. Like I said not playing IRS Cop but only taking clients that are trying to do right. And if they are not, teach them. If they won't learn... boot them.

[rfk]

My opinion

My feeling as I see this evolving is that OPR, ala Karen Hawkins, is fine tuning necessary paperwork in order to ferret out bad preparers, bad tax advisers who work this stuff, and any clients who are part of it. In my recent CPE ethics seminar, there were quite a few tax advisers who were sanctioned because of this or that.

I am not saying that this is nothing new or bad, but it appears that we are getting these rumblings about having to be even careful about how we do our business. And yes clients do want us to bend the rules. Since I do not bend the rules, I do not have that many clients.

I just do not know where this is going and how it is going to end up. It will probably be fine but I am watching this thing unfold from year to year. When Karen took office, got settled, and had meetings with certain group(s) [our tax industry community], it sounded as though the message was do it this way or too bad - this is how it is going to be.

rfk

[Gretel]

Nobody knows what exactly will be coming our way, or just your and/or my way. While I agree that there is basically nothing new, something is new, and that is the substantial authority rule. A lot of information we look at, like Pubs and Instructions are not part of this and cannot be relied on.

While I think it is a good idea to weed out the bad preparers, I am also afraid that the good preparers who have sleepless nights anyway, will just have plenty more of them. What also worries me is the level of IRS employees that is send out to catch us, and that these employees have all the right to slap any of us with a penalty of $1,000 just for forgetting to mark a box on the tax return. Sure, we are required to check to actual tax return to see if everything looks OK, but you tell me you never missed anything!

I think the rules made to catch someone who is not us, in combination with IRS employees who have no common sense are really dangerous.