NAEA and NATP

[Snaggletooth]

Other posts are ongoing about the eye-opening article in NATP describing "visits" by the IRS to preparers, with an agenda of assessing preparer penalties. Whereas the veracity of the accounts in the article has been questioned on this board, it DOES appear that the spectre of using preparer penalties for revenue instead of auditing taxpayers is very attractive for the IRS.

The implied duty (under the guise of "due diligence") to AUDIT our clientele strikes at the very heart of our practice. To change our procedures to include the gathering and storage of documents just to cover our butt means we will HAVE to increase our fees and become non-competitive. Well-healed preparation sources such as HRB, JH, TurboTax (where the taxpayer can cheat all he wants) will resist these penalties and survive this new trend, whereas people like myself will go out of business.

NOW is the time for NAEA and NATP to make our thoughts known. These organizations are supposed to be founded for our own benefit, and NOT just to send their people to nicey-nice discussions with the IRS. If you are a member of an organization 50,000 people strong, all of us with a common objective, we should expect such an organization to make its wishes felt.

This is not a call for militant countenance. There are things such as tracking the activities of legislators, voting records, officials in the IRS, etc. That's what other trade organizations do.

[OtisMozzetti]

...
TurboTax (where the taxpayer can cheat all he wants) will resist these penalties and survive this new trend, whereas people like myself will go out of business.
...

The IRS really ought to wish that tax professionals other than TurgoTax stay in business since we restrain taxpayers from cheating, and we help taxpayers to understand their tax responsibilities.

EA in California

[Koss]

Preparer Visits

I fully agree that NAEA, NATP, and the professional societies for CPAs should take a strong advocacy position on this issue.

Just to clarify one point, though--

I am not "questioning the veracity" of the stories in the NATP journal article. I don't think the tax pros who wrote those narratives are making stuff up, and I don't think they are intentionally misleading us.

I do think that some of the narrative is a little bit vague and ambiguous, and that more detail would have been helpful. The article bounces around between EIC due diligence and other issues, and the grounds for the penalties is not explained in enough detail.

My point is really pretty simple. There is an EIC due diligence penalty of $500 return. The most disturbing story in the article was a guy who got slammed with $23,000 in penalties. That's 46 returns.

I stand by my assertion that this $500 penalty cannot be assessed in connection with any return that does not involve EIC. And even if the return has EIC, the penalty cannot be assessed in connection with issues that do not affect the calculation of EIC, or the determination of the taxpayer's eligibility for EIC. Deductions on Schedule A have no impact on EIC, so they cannot be the basis for this penalty. Schedule C has an obvious and direct relation to EIC, so it can be associated with this penalty.

The other penalties are $50 per return, and they are the proverbial slap on the wrist for things like not signing the return or not giving the client a copy of the return. And I don't think many of us really have to be concerned about those penalties.

EIC due diligence is a major issue for many of us. But I don't think the IRS can assess any other type of "due diligence" penalty on preparers.

I don't think the tax pros in the journal article are lying, or intentionally distorting the facts of their case. I do think that the article does not provide enough detail about how and why the penalties were assessed. And that has led to substantial confusion and debate in this community.

BMK

[taxxcpa]

The best solution

The best solution might be to refuse to do EIC returns or charge a one-time $ 500 extra fee to cover the risk.

[MLINDER42]

Naea And Natp

As I have stated before that I have had two of my preparers have EIC audits.If you as an individual preparer do not do over 100 EIC returns I believe you will never be audited.Plus the $500 a return fine did not start till the returns we just filed so I can not understand how he could have $500. penalties.I will be charging $100 more for every EIC return next year plus hiring someone to recheck every return for problems.

[JG EA]

I fully agree that NAEA, NATP, and the professional societies for CPAs should take a strong advocacy position on this issue.

Just to clarify one point, though--

I am not "questioning the veracity" of the stories in the NATP journal article. I don't think the tax pros who wrote those narratives are making stuff up, and I don't think they are intentionally misleading us.

I do think that some of the narrative is a little bit vague and ambiguous, and that more detail would have been helpful. The article bounces around between EIC due diligence and other issues, and the grounds for the penalties is not explained in enough detail.

...
...

BMK

I agree. The ones that came out with a pleasant audit - it seemed straightforward. The ones that got large penalties didn't really say why. I am hoping there is more to the story. I can’t believe that they gave penalties just because they didn’t see enough non- required documentation.

_____Paul’s Story: “We ask self-employed individuals to fill out, sign and date a sheet listing their income and each kind of expense… The IRS agent said that our practice is not proper. The only thing she will accept is that we have a copy of the clients’ record-keeping system… just part of it.”

They got fined for that? Where does it say we must do that? Where does it say our clients’ need a particular record-keeping system? I would not accept a fine just because an auditor said this is not proper. There has to be more to the story.

_____Kentucky Preparer’s Story: “…she spent 5-7 full days writing us up for every nit-picking thing she could find, and then left us with $15,000 in fines.”

What? There is definitely more to that story.

[Gary2]

I fully agree that NAEA, NATP, and the professional societies for CPAs should take a strong advocacy position on this issue.

Agreed

I am not "questioning the veracity" of the stories in the NATP journal article. I don't think the tax pros who wrote those narratives are making stuff up, and I don't think they are intentionally misleading us.

I do think that some of the narrative is a little bit vague and ambiguous, and that more detail would have been helpful. The article bounces around between EIC due diligence and other issues, and the grounds for the penalties is not explained in enough detail.

Agreed again, especially about not questioning the veracity.

My point is really pretty simple. There is an EIC due diligence penalty of $500 return. The most disturbing story in the article was a guy who got slammed with $23,000 in penalties. That's 46 returns.

It could be 23 returns, since they can penalize the preparer and employer separately. See http://www.eitc.irs.gov/rptoolkit/faqs/duediligence/ , I think the 4th and 5th boxes down.

The other penalties are $50 per return, and they are the proverbial slap on the wrist for things like not signing the return or not giving the client a copy of the return. And I don't think many of us really have to be concerned about those penalties.

There are other, higher penalties. The only other $500 penalty that I see at http://www.irs.gov/taxpros/article/0,,id=248569,00.html is for negotiation of a refund check.

[MLINDER42]

Naea And Natp

My first EIC audit was self employed individuals.Due diligence with self employed(getting EIC)you must have copies of receipts,calendar,or something that shows how they kept track of the money they earned.These people have no bank account, no business license,work from their homes.Irs wants some proof that this business exists.We will not due EIC self employed with out some proof of having done the work.If you do not deal with this type of return you can not understand the reasons they want some proof.I refused over 100 of these returns this year and my earnings reflect it.

[Jiggers]

My first EIC audit was self employed individuals.Due diligence with self employed(getting EIC)you must have copies of receipts,calendar,or something that shows how they kept track of the money they earned.These people have no bank account, no business license,work from their homes.Irs wants some proof that this business exists.We will not due EIC self employed with out some proof of having done the work.If you do not deal with this type of return you can not understand the reasons they want some proof.I refused over 100 of these returns this year and my earnings reflect it.

The problem I see with this is that we are having to audit taxpayer information in some cases and in other cases we don't have to.

For the very few clients that accidently qualified for EIC, I didn't know that until I prepared the return using their standard information. I do not prepare returns with the client present, my policy and procedure.

So, the client now qualifies for EIC, do I have to bring the client back in and give him the 3rd degree asking for additional information that I don't normally require? Hinting to the client that I don't believe him or trust his information?

Come one NATP, NAEA, and the CPA organizations, how about some assistance with this issue?

[Golden Rocket]

Jiggers I agree

Yes, the thread started out by exploring the energization of our professional organizations to become pro-active in getting something done about this disturbing trend, and the only responses have been continued discussion about the penalties.

NATP does a good job on reporting - their recent article is a perfect example. But as far as being an organization to help influence policy? All I hear is that they get invited to be part of an audience somewhere to sound out the latest and greatest thing that IRS wants to do.

It may not be fair to expect more from them, but we do know that other professional organizations with a base of 50,000 - 100,000 can make their presence felt. It's a shame when my 89-yr old mother can call her congressman and get more accountability from the IRS than an organization with this many people.

[MLINDER42]

NAEA and NATP

Part of the problem is the majority of EA's do not do a lot of EIC returns so they do not see this as a problem.I am never met an EA who runs a low income practice like I do.If you do under 100 EIC returns they will never audit you.I was told this by both auditors.

[JoshinNC]

What's a "low income practice"

Part of the problem is the majority of EA's do not do a lot of EIC returns so they do not see this as a problem.I am never met an EA who runs a low income practice like I do.If you do under 100 EIC returns they will never audit you.I was told this by both auditors.

Before I say whether I do or do not run one, I'd like to know what one is

[Will]

Before I say whether I do or do not run one, I'd like to know what one is

One that does a lot of EIC returns.

[MLINDER42]

NAEA and NATP

Low income is average return single female making under 25,000 with two children. 85% of returns have EIC .70% take bank products and only 20% are MFJ.That is the break down of my over 2000 returns in 2012 down 150 from year before because we refused to do some returns any more.

[JohnH]

I run a low income practice, but I'm not referring to my clients...


--> So, the client now qualifies for EIC, do I have to bring the client back in and give him the 3rd degree asking for additional information that I don't normally require? Hinting to the client that I don't believe him or trust his information? <---

That one's easy. Just tell the client:
"It isn't that I don't trust you. The problem is the IRS doesn't trust either of us."