EITC Letters 5621 and 5621-A to Taxpayers

[taxea]

The IRS is sending letters to taxpayers re eitc. you may want to check out their notice .

[AZ-Tax]

TP is to Voluntarily check the accuracy of their Sch C...really.

http://news.cchgroup.com/index.php/tax-headlines/federal-tax-headlines/taxpayers-claiming-eitc-may-receive-eitc-letters-5621-andor-5621-a/

"Letter 5621-A, which asks the taxpayer to review his/her tax return to determine if all the income and expenses reported from self-employment on Schedule C or Schedule C-EZ are complete and correct."

Interesting.

[David1980]

Taxpayers voluntarily checking is cheap for the IRS. Obviously they'd get better compliance with actual audits but that costs more money I don't see politicians wanting to give the IRS more money for enforcement.

And not all taxpayers may even be aware they claimed Sch C income or expenses. I've had more than one person come to me with an IRS letter where the return had been prepared with bogus deductions or credits. Someone that comes in with a letter disallowing education credits for example and it turns out they never were a student and had no idea an education credit was claimed on their return. If the taxpayer isn't aware their preparer used fictitious Sch C such a letter might help them to realize it wasn't some secret trick that the preparer knew to get a big refund but outright fraud. Some taxpayers at least would want to correct it.

It also could help scare other taxpayers into compliance or better record keeping. Basically letting them know the IRS is watching for that sort of thing. Like how someone might get a warning for speeding in their car.

Personally I like these letters, when justified, as I can use them to encourage my clients to keep better records.

[taxea]

Taxpayers voluntarily checking is cheap for the IRS. Obviously they'd get better compliance with actual audits but that costs more money I don't see politicians wanting to give the IRS more money for enforcement.

And not all taxpayers may even be aware they claimed Sch C income or expenses. I've had more than one person come to me with an IRS letter where the return had been prepared with bogus deductions or credits. Someone that comes in with a letter disallowing education credits for example and it turns out they never were a student and had no idea an education credit was claimed on their return. If the taxpayer isn't aware their preparer used fictitious Sch C such a letter might help them to realize it wasn't some secret trick that the preparer knew to get a big refund but outright fraud. Some taxpayers at least would want to correct it.

It also could help scare other taxpayers into compliance or better record keeping. Basically letting them know the IRS is watching for that sort of thing. Like how someone might get a warning for speeding in their car.

Personally I like these letters, when justified, as I can use them to encourage my clients to keep better records.

How is it they don't know what their preparer did? Weren't they given a copy of the return? Did they review it? This preparer needs to be reported to the IRS.

[David1980]

How is it they don't know what their preparer did? Weren't they given a copy of the return? Did they review it? This preparer needs to be reported to the IRS.

Even some of my clients don't know what's on their tax return and I go through the forms with them. I think the reality is most taxpayers don't bother reviewing a tax return. Especially those that primarily care about how much of a refund they're getting. It's like those 20 page bank product applications at the big box places - nobody reads those things, they flip to the signature page and sign. And a lot of taxpayers don't read or retain a copy of their tax return either. The garbage bin outside of an H&R Block is probably a great place to steal some identities.

"This preparer needs to be reported to the IRS"

I suspect a lot of preparers do get reported and that the majority of those reports are filed away and never followed up on. Congress could change that, but I think they'd be more likely to pass a bill to "abolish the IRS" than they would be to help it do anything. So instead, we get low cost self-enforcement like EIC letters 5621 and 5621-A.

[dtlee]

I have clients that track lots of income and expenses for Schedule C, all in the wrong place. They track freight-in and refunds for returns as expenses. They count all of their purchases as Cost of Goods Sold. They track the entire portion of any meal expense as a deduction. Hence, what they expect to see on Schedule C never matches what is actually there. Even though I go through this in detail with them so that they know that things were taken in different places or in different amounts, I doubt they would remember if the IRS asked them to make sure their Schedule C was right 7 or 8 months later.

[taxea]

Even some of my clients don't know what's on their tax return and I go through the forms with them. I think the reality is most taxpayers don't bother reviewing a tax return. Especially those that primarily care about how much of a refund they're getting. It's like those 20 page bank product applications at the big box places - nobody reads those things, they flip to the signature page and sign. And a lot of taxpayers don't read or retain a copy of their tax return either. The garbage bin outside of an H&R Block is probably a great place to steal some identities.

"This preparer needs to be reported to the IRS"

I suspect a lot of preparers do get reported and that the majority of those reports are filed away and never followed up on. Congress could change that, but I think they'd be more likely to pass a bill to "abolish the IRS" than they would be to help it do anything. So instead, we get low cost self-enforcement like EIC letters 5621 and 5621-A.

I meant reporting them to IRS criminal investigations.