I know most of my clients, have been in some homes, go to church with some. Do i still have to ask for some type of documentation? Always have been diligent about asking questions on situtions i wasn't sure about, but does personal knowledge count for anything?
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Documentation-due diligence
I have noticed that the IRS pronouncements on due diligence do not include "personal knowledge" as satisfactory documentation.Originally posted by JenMO View Post
Personal knowledge, like a promise to pay later for tax returns today, is generally worth the paper it is written on.
However, you are of course free to do what you want.Friends double; family triple. Don't buy an audit for yourself. If someone has to go to jail make sure it is the client. Remember it is only taxes, nothing important. -
I Believe...
I believe were only to make save copy of documents that clients offer us (SS cards, Birth Certs, etc.). Not force them to them give us. If they don't have them with them at time of interview they don't have to go home and get them. Unless it a tax doc, of course. Just my opinion on what I have read.Comment
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As August pointed out, if we "rely" on documents, we need to keep a copy of it.
If the information we are receiving from the taxpayer seems to be "incorrect, inconsistent, or incomplete", we may need to rely on documents to prove the taxpayer's statements (and therefore need to keep a copy of the documents).
Otherwise, we would only need documentation if the "worksheets" asks for it (I haven't looked at the details of the "worksheets yet", but I don't think they require it).
§1.6695-2T has the "due diligence" requirements, including the "retention of records" requirements. For the "retention of records", it says:
(4) Retention of records. (i) [Reserved]. For further guidance, see §1.6695-2(b)(4)(i).
(A) [Reserved]. For further guidance, see §1.6695-2(b)(4)(i)(A).
(B) A copy of each completed worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section); and
(C) A record of how and when the information used to complete Form 8867 and the applicable worksheets required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section) was obtained by the tax return preparer, including the identity of any person furnishing the information, as well as a copy of any document that was provided by the taxpayer and on which the tax return preparer relied to complete Form 8867 and/or an applicable worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section).
(ii) through (iii) [Reserved]. For further guidance, see §1.6695-2(b)(4)(ii) through (iii).
The "gray area" that I see is what does "the identity of any person furnishing the information" mean? Do we just need to write down their name? Or do we need a driver's license? On the other hand, it appears that the software wants Driver's License information now, so we may want to get the anyways.
Last edited by TaxGuyBill; 01-16-2017, 01:05 PM.Comment
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Lots of Extra Work this Year!
Social Cards for everyone will be a blast. Alerting them before they come in will be a neccessity and a must.Comment
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Some Id, social sec cards we have collected in previous years. Do i need to dig out, or ask again?Comment
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My Take
If your client is not cheating on the credits requiring Form 8867, and you do an amount of due diligence that is commensurate with the fact that you have known the family for 20 years, then I believe there is no downside to not driving them and you nuts for SS cards, drivers licenses etc. To me all of this is only an issue if they are audited, unlikely, and if they are found to be cheating.
I am going to insist on complete paperwork to figure the AOC unless the tuition paid box is used on the 1099-T. This you have to do in order to have a chance to get it correct when tuition billed is used. As for EIC and CTC I am not going to do anything more than I have normally done with my long standing prior clients.Comment
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Concerning question #3 and the Child Tax Credit; questions must be asked and documented. I would like to work up questions for a worksheet to address this. On other issues later.
Here is my start; comments please--
CTC questions for #3a.
Is Johnnie your qualifying child, not older than 16, and did he live with you for more than 6 months?
Do you have birth records to prove this?
For non-parents: How are you related to the child? Could you prove this if ever required?
#3b.
The only thing I can think of is to review the answers from #3a.
This is silly when you have been preparing returns for years for a given family, but if we are to certify this information--??Comment
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Note TTB 1-17 and 11-3 confirm that both the 1098-T AND receipts will be required for due diligence satisfaction. In the past I have used detailed transcripts of the student's account which show dates paid, amounts, and type of transaction/expense, and methods of payment. I would think this would be sufficient as a receipt. I have never figured out why the amount "billed" is even on the form.Originally posted by Kram BergGold View PostComment
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Originally, in 1998 the 1098-T didn't have any dollar amounts reported. Then, this happened:Originally posted by Burke View Post
"Form 1098-T has been revised for 2002 under Proposed
Regulations section 1.6050S-1 that describes rules for choosing
to report either the net amount of payments received (box 1), or
the net amount billed (box 2), for qualified tuition and related
expenses during the calendar year.""You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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I knew it was a requirement, just never could figure out its relevance to a cash basis taxpayer.Comment
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As I understand it, the qualifying amount paid must be shown on the 1098-T. No more relying on the taxpayers records, canceled checks or statements.Originally posted by Kram BergGold View Post
From WCPE
"Higher education information reporting is to include qualified amounts actually paid after Dec. 31, 2015. The provision strikes “or the aggregate amount billed” from the law.
AND
"Beginning in 2016, taxpayers will not be allowed to claim the American Opportunity Tax Credit or the Lifetime Learning Credit under §25A, or the tuition deduction under §222,
unless the taxpayer has received a Form 1098-T from the educational institution."
MikeComment
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Your tax update is pretty out of date. About a year ago, IRS waived penalties for tax year 2016 (filed in early 2017) for schools issuing 1098-T. More recently, they did it again for tax year 2017 (to be filed in early 2018).Originally posted by mactoolsix
So while the law did indeed change, there is no consequence to the issuer for not following it. Expect to still see a lot of 1098-T with only Box 2 this year and next. You still need the 1098-T to claim the credit, even if it's nearly useless in some cases."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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Robert - Interesting that this is from the WCPE just taken about 4 weeks ago.Originally posted by Rapid Robert View Post
So you are saying we don't need a paid amount in box 1 of the 1098-T?
Do you have a reference or cite of the ruling that changed this?
Here is the link to the reference
Explanation of Provisions - bottom of page 3 to page 4
However I see it does not specify the amount paid must be shown on the 1098-T (as was indicated in the seminar)
Thanks.Comment
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I think Robert is saying we still may get 1098-Ts with an amount in box 2 because the IRS delayed the requirement for box 1 (again).
From Macuser's link:
"Specifically, the proposed regulations ... unless an exception applies, no education tax credit is allowed unless the taxpayer (or the taxpayer’s dependent) receives a Form 1098–T."
and
"Accordingly, a taxpayer who meets the requirements in § 1.25A–1(f) regarding the Form 1098–T requirement to claim the credit and who can substantiate payment of qualified tuition and related expenses may
include these unreported expenses in the computation of the amount of the education tax credit allowable for the taxable year even though the expenses are not reported on a Form 1098–T."Comment
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