How underground preparers work.

[JG EA]

I got some new clients - their former preparer is not going to do taxes anymore. The return was done with no preparer information or PTIN, but it was efiled and the 8879 had the name of the ERO.

So, I'm guessing that's how they did the return, just prepared it under the guise of entering the client's information for electronic filing.

[Koss]

ERO but no PTIN

The current regulations still allow an ERO to electronically file a return that has been self-prepared by a taxpayer.

Your new client was obviously dealing with someone who was not following the rules. It sounds like that guy was preparing the return, but was transmitting it as a self-prepared return.

I would think that the IRS will begin to look closely at any ERO that files dozens of returns that are self-prepared, especially if that is the only type of return that is filed.

BMK

[taxea]

Koss...the IRS is looking at SP returns that appear to be professionally done and are sending letters to the TPs.

[Koss]

Self-prepared returns

the IRS is looking at SP returns that appear to be professionally done and are sending letters to the TPs.

I've seen that in IRS press releases...

What does it mean for a return to "look like it was done by a professional" even though it is not signed?

At one time, I thought that paper returns that are generated by tax software had some codes at the bottom of Form 1040 that could be used to identify which program had generated the return, and whether it was a professional or DIY version. And I still that may be possible.

But it's a bit of a stretch.

Is the IRS going to use an algorithm that measures the complexity of the return?

And what are they going to say in the letter to the taxpayer?

"We don't think you're smart enough to have prepared this return on your own. Did you pay someone who didn't sign it?"

That approach won't catch a lot of underground preparers. People who have really complicated tax returns are more likely to go to a legitimate tax pro.

Off-the-grid preparers tend to do a lot of EIC returns, and other fairly simple returns, for uneducated and unsophisticated taxpayers who think they are getting a bargain...

I guess I just don't get it. How is the IRS going to recognize returns that were prepared by a rogue tax professional who didn't sign it?

BMK

[taxea]

I've seen that in IRS press releases...

What does it mean for a return to "look like it was done by a professional" even though it is not signed?

At one time, I thought that paper returns that are generated by tax software had some codes at the bottom of Form 1040 that could be used to identify which program had generated the return, and whether it was a professional or DIY version. And I still that may be possible.

But it's a bit of a stretch.

Is the IRS going to use an algorithm that measures the complexity of the return?

And what are they going to say in the letter to the taxpayer?

"We don't think you're smart enough to have prepared this return on your own. Did you pay someone who didn't sign it?"

That approach won't catch a lot of underground preparers. People who have really complicated tax returns are more likely to go to a legitimate tax pro.

Off-the-grid preparers tend to do a lot of EIC returns, and other fairly simple returns, for uneducated and unsophisticated taxpayers who think they are getting a bargain...

I guess I just don't get it. How is the IRS going to recognize returns that were prepared by a rogue tax professional who didn't sign it?

BMK

I don't know what their criteria is but I'm sure they do. According to the IRS they are going to ask the TP if they really did their own return and then explain the TPIN regs. Beyond that I don't remember. I didn't keep it because I knew it didn't apply to me. Try searching the IRS site.

[tpnl]

I will probably get a letter . . .

from the IRS. I do my own return, a partnership return and have two schedule Cs on my 1040. I don't pay anyone to do this. How will the IRS treat me?

[JohnH]

I have several charity cases, family members, and my own that I do not sign as a paid preparer because I dont charge them I guess some of these may get the letters if IRS sends them. That really doesn't concern me though, because the truth is always a valid explanation.

[Larmil]

I have several charity cases, family members, and my own that I do not sign as a paid preparer because I dont charge them I guess some of these may get the letters if IRS sends them. That really doesn't concern me though, because the truth is always a valid explanation.

In Taxworks I file such as "NONPAID PREPARER".

[thomtax]

I have several charity cases, family members, and my own that I do not sign as a paid preparer because I dont charge them I guess some of these may get the letters if IRS sends them. That really doesn't concern me though, because the truth is always a valid explanation.

Are you really sure that the government wants the truth or even pays any attention to it?

[taxea]

from the IRS. I do my own return, a partnership return and have two schedule Cs on my 1040. I don't pay anyone to do this. How will the IRS treat me?

If you use your preparer pin and PTIN they should be able to figure it out.

[JohnH]

In Taxworks I file such as "NONPAID PREPARER".

I don't see any place on the return to sign as "Unpaid Preparer". Seems to me it's either "Paid Preparer" or blank. If IRS wants tax pros to sign as Unpaid Preparer they ought to put a check box down there.

[S T]

I use Taxworks as well, and I have my "Paid Preparer Profile" then can create another "NonPaid Preparer Profile"

When I use NON Paid - it still prints on the Paid Preparer Line but indicates that I am a "nonpaid preparer" for that return.

Not sure what purpose that really serves - but the software will not let me leave it as a "blank" line

I only have one or two returns a year that I might not want to sign as "paid preparer"

Sandy

[taxea]

I use Taxworks as well, and I have my "Paid Preparer Profile" then can create another "NonPaid Preparer Profile"

When I use NON Paid - it still prints on the Paid Preparer Line but indicates that I am a "nonpaid preparer" for that return.

Not sure what purpose that really serves - but the software will not let me leave it as a "blank" line

I only have one or two returns a year that I might not want to sign as "paid preparer"

Sandy

I don't charge family for returns but I don't indicate self-prepared on them either