IRS NastyGram

[Corduroy Frog]

I read about this in the new TTB 1040 Edition (Page 1-24).

Says that the IRS sent out ugly letters to 21,000 tax preparers to the effect that their returns contained an unacceptably high proportion of Sch As, Sch Cs, Sch Es. A follow-up visit to the preparers' facilities was mentioned.

I don't really know what is so onerous about these forms that would cause IRS such heartburn. Maybe the fact that 2/3 of all returns are "short forms" and they are looking for that kind of proportion from every preparer. Maybe As, Cs, and Es introduce too many deductions??

Of my appx 200 returns, at least 80%-85% of mine are at least this level of complexity. I have very few returns that would qualify as being 1040As or 1040EZs. Mostly these are for children of established customers.

Comments from any of us about these letters? Will anyone admit to having receiving one of these letters?

[Gretel]

I haven't, but I was shocked about it.

I heard that one of these letters went to a person who only filed one tax return, his own.

I am very interested as well to hear who has received this letter and also, later on, who has actually received a visit.

[okie1tax]

IRS letter

http://www.taxalmanac.org/index.php/Discussion:Received_IRS_Letter_4809

Big deal on this here - above. AND, I swear there was a like discussion on this board, but could not find it.

[OtisMozzetti]

I read about this in the new TTB 1040 Edition (Page 1-24).

Says that the IRS sent out ugly letters to 21,000 tax preparers to the effect that their returns contained an unacceptably high proportion of Sch As, Sch Cs, Sch Es. A follow-up visit to the preparers' facilities was mentioned.

I don't really know what is so onerous about these forms that would cause IRS such heartburn. Maybe the fact that 2/3 of all returns are "short forms" and they are looking for that kind of proportion from every preparer. Maybe As, Cs, and Es introduce too many deductions??

As I see it, tax returns which involve Schedule A, C, or E are more likely to be taken to a paid professional. If the IRS has actually been forming some opinions about what was in the A,C, and/or E; then that might form the basis for selecting preparers to visit. It seems important to clarify what exactly the IRS said.

[S T]

Okie

Thanks for the link to TA discussion on the letters.

Very informative and a lot of information to digest. Seems like anyone one of us could be subject to receiving the "letter"

Wish IRS would define - as was stated in many of the posts at TA.

Sandy

[joanmcq]

Of the 21,000 preparers that received the letter, 3,000 will be selected to visit. I will venture to guess of the original amount sampled (think of a statistical sample), those whose Sch's A, E or C might be a bit out of whack are the ones being selected for the 'visits'. Like every one of the A's has large misc expenses. These are pretty well known areas for preparer fraud. And the letters have already gone out as far as I know, so if you haven't gotten one yet, you are probably ok.

[taxea]

http://www.taxalmanac.org/index.php/...RS_Letter_4809

Big deal on this here - above. AND, I swear there was a like discussion on this board, but could not find it.

I think it was IRS Letter 4906 or 4506 or something like that

[BP.]

I read about this in the new TTB 1040 Edition (Page 1-24).

I really like the language used in TTB's Editorial Comment- IRS NastyGram. The writer used strong words to effectively convey his or her message, and paint a picture for readers.

Would just suggest checking this out: http://begthequestion.info/

[Bees Knees]

TMI posted the entire letter, AND a follow up letter from IRS a few days ago:

http://www.thetaxbook.com/updates/TheTaxBook/Updates/2011%2012-22%20news%20-%20Nasty%20Gram.pdf

Apparently IRS got some complaints from the letter. Their response was:

NOTE: We have received numerous inquiries and feedback about the recent Letters
4809 we sent to some preparers. The intent of the letter was to notify certain
preparers that some clients’ returns contained entries at the extremes of what we
would expect to see. These were returns that had such unusual characteristics that
there would have to be very unusual circumstances for them to be accurate. If
you received this letter, you should review the tax laws in those areas in preparation
for next filing season, including accurately computing receipts and allowable
expenses.

So rather than apologize for accusing tax return preparers of filing Schedule A, C, or E, they accuse the preparer of it all over again.

My question: If IRS is so sure the preparers did them wrong, why not audit those returns? Why the threat letters when there is no proof anyone did anything wrong?

[Gretel]

http://www.taxalmanac.org/index.php/...RS_Letter_4809

Big deal on this here - above. AND, I swear there was a like discussion on this board, but could not find it.

Thank you so much for posting this link. I couldn't pull myself away from it yesterday, especially at the end when people posted who have been audited/visited (better language doesn't make it any better).

Also, a huge component was if we violate taxpayer's privacy if the taxpayer doesn't even know that their return is looked at. I am surprised and very uncomfortable that the IRS actually can do this. While they are claiming the are only looking at procedures nobody can tell me that they would look away if they discover a material error. It would be the same as we would be looking away if a client tells us at a social event that they make money under the table.

[Nashville]

Intimidation Only

My question: If IRS is so sure the preparers did them wrong, why not audit those returns? Why the threat letters when there is no proof anyone did anything wrong?

Good question Bees. Sounds like they want to bully us into not taking legitimate deductions rather than get off their butt and spend some money doing audits.

[OtisMozzetti]

...rather than get off their butt and spend some money doing audits.

It seems to me that when the IRS spends more money doing audits, they actually get back considerably more tax, penalty, and interest revenue than the money spent doing audits.

Also, as tax professionals, the more that the IRS spreads the word via audits that tax returns must be accurate with adequate substantiation available, the more that the taxpaying public understands the need for tax professionals and the more money that we make in the long run.

EA in Calif.

[Gretel]

It seems to me that when the IRS spends more money doing audits, they actually get back considerably more tax, penalty, and interest revenue than the money spent doing audits.

Also, as tax professionals, the more that the IRS spreads the word via audits that tax returns must be accurate with adequate substantiation available, the more that the taxpaying public understands the need for tax professionals and the more money that we make in the long run.

EA in Calif.

This is what I used to say until I just learned that a taxpayer having the tax return prepared by a professional has pretty much no way out of the accuracy related penalty, whereas user of Turbo Tax can play innocent. An earlier court case supposedly was overturned to protect Turbo Tax users. Don't have any details, was said in a seminar.

Plus if taxpayers are getting more aware that they are exposed twice, they get audited or a their tax professional gets audited, I don't think that will help any one of us.

I am wondering what our Professional ***. do about this and if they can do anything about this.

[Kram BergGold]

Another viewpoint

To me, the IRS is looking for preparers that are making up deductions for the clients. I have second hand knowledge of a tax professional who routinely increases miscelleanous and charitable contributions for clients. I think the IRS is looking at patterns and then rightfully checking out their suspicions.

[Bees Knees]

To me, the IRS is looking for preparers that are making up deductions for the clients. I have second hand knowledge of a tax professional who routinely increases miscelleanous and charitable contributions for clients. I think the IRS is looking at patterns and then rightfully checking out their suspicions.

Nobody is questioning the motive for why the IRS is going after unscrupulous preparers. We are questioning their methods. If a return looks suspicious, audit it. Don't send out computer generated threat letters that hit everyone, including legitimately prepared returns. The only people you scare are those doing everything correctly. Unscrupulous preparers will simply throw the letter in the trash.

That would be like the police sending a letter to everyone in a high crime neighborhood that says: “You live in a neighborhood where many people do drugs, commit robbery, and rape. Statistically, it would be highly unlikely that you are not one of the offenders. Please read the law on these subjects and educate yourself on what you can and cannot do. We will visit 10% of the homes in your neighborhood next month to make sure everyone knows the law."