Preparer penalty reminder

[BHoffman]

Shades of Gray

Please don't take my comments as black or white - what will work for me is not universal. Yeah, I might take a new SCorp with no officer salary and a loss. Home office and no employees gives me more flexibility to turn work away.

Perhaps the IRS is trying to warn tax preparers from actually suggesting the SCorp election for no other reason than to avoid payroll taxes.

I believe the IRS certainly does consider professional tax preparers to be under their "jurisdiction" - they have a lot of power over us. However, I agree with Solomon. I think this shot fired by the IRS over our bow is their attempt to use us to get the taxpayers into compliance. Maybe the law is too complex for the general public to fully comprehend. I believe it might be part of our job to explain it to the client - but to enforce it??? And be subject to penalty for a decision made beyond our control???

In the meantime, Salary.com gives some indication of reasonable salary ranges specific to geographic areas.

[solomon]

From Prop. Reg. 129243-07 on which there was a public hearing yesterday.

Verification of information furnished by taxpayer or other party —(1) In general . For purposes of sections 6694(a) and (b) (including meeting the reasonable belief that the position would more likely than not be sustained on its merits and reasonable basis standards in §§1.6694–2(b) and (c)(2), and demonstrating reasonable cause and good faith under §1.6694–2(d)), the tax return preparer generally may rely in good faith without verification upon information furnished by the taxpayer. A tax return preparer, however, may not rely on information provided by a taxpayer with respect to legal conclusions on Federal tax issues. A tax return preparer may also rely in good faith and without verification upon information furnished by another advisor, another tax return preparer or other party (including another advisor or tax return preparer at the tax return preparer’s firm). The tax return preparer is not required to audit, examine or review books and records, business operations, or documents or other evidence to verify independently information provided by the taxpayer, advisor, other tax return preparer, or other party. The tax return preparer, however, may not ignore the implications of information furnished to the tax return preparer or actually known by the tax return preparer. The tax return preparer must make reasonable inquiries if the information as furnished appears to be incorrect or incomplete. Additionally, some provisions of the Code or regulations require that specific facts and circumstances exist (for example, that the taxpayer maintain specific documents) before a deduction or credit may be claimed. The tax return preparer must make appropriate inquiries to determine the existence of facts and circumstances required by a Code section or regulation as a condition of the claiming of a deduction or credit.