Tax Preparer Defense Attorney Houston
If you are a tax preparer and have been more than lenient in giving out deductions for the Earned Income credit, fuel tax credit, or similar small business deductions on schedule C, then, you might have been contacted by the IRS Criminal Investigations Unit. They would have left a cream colored card on your front door or visited you at your work place. This is procedure, don’t be scared, just get a criminal tax lawyer.
IRC §6695(g) states: Any person who is a tax return preparer with respect to any return or claim for refund who fails to comply with due diligence requirements imposed by the Secretary by regulations with respect to determining eligibility for, or the amount of, the credit allowable by section 32 shall pay a penalty of $500 for each such failure. IRC$§6695(h) allows a cost-of-living adjustment. The penalty for taxable years beginning in 2015 is $505.
The real crack down comes as a result of social security numbers being used multiple times on different tax returns. The problem started when tax preparers were not using any due diligence in checking out the facts of the numbers and proposed deductions. As a result, there is *heightened scrutiny for giving out deductions. When you do this a few too many times, the IRS will flag your Paid Tax Preparer ID Number, and then start auditing all of your clients. Finally, an undercover IRS agent will ask you to do their tax return without exposing their true identity and simply catch you on video applying deductions without them even asking you. Once they have you on video, life will get difficult.
Call our office if you have been contacted by the IRS Criminal Investigations Unit. We have defended numerous tax preparers.
The Four Due Diligence Requirements
Requirement The Tax Returns Preparer Must:
1. Complete and Submit Eligibility Checklist
Complete Form 8867, Paid Preparer’s Earned Income Credit Checklist, to make sure you consider all EITC eligibility criteria for each claim you prepare.
Complete checklist based on information provided by your client(s).
For EITC EITC returns or claims for refund filed electronically, submit Form 8867 to the IRS electronically with the return.
For EITC returns or claims for refund not filed electronically, attach the completed form to any paper return you prepare and send to the IRS.
For EITC returns or claims for refund you prepare but do not submit directly to the IRS, provide the completed Form 8867 to your client to send with the filed tax return or claim for refund.
Requirement: The Tax Return Preparer Must:
2. Compute the Credit
Complete the EIC worksheet from the Form 1040 instructions, or Publication 596, Earned Income Credit, or a form with the same information. The worksheet shows what is included in the computation, that is, self-employment income, total earned income, investment income and adjusted gross income. Most professional tax preparation software includes the computation worksheet.
Requirement: The Tax Return Preparer Must:
3. Knowledge
Not know or have reason to know any information used to determine your client’s eligibility for, or the amount of EITC is incorrect, inconsistent or incomplete.
Make additional inquiries if a reasonable and well-informed tax return preparer would know the information is incomplete, inconsistent or incorrect
Know the law and use your knowledge of the law to ensure you are asking your client the right questions to get all relevant facts.
Document any additional questions you ask and your client’s answer at the time of the interview.
The Treasury Regulations give examples of when to apply the knowledge requirement.Find the regulations for tax return preparer due diligence requirements on the Government Printing Office site.
Requirement: The Tax Return Preparer Must:
4. Keep Records
Keep a copy of the Form 8867 and the EIC worksheet.
Keep a record of all additional questions you asked your client to comply with your due diligence requirements and your client’s answers to those questions.
Keep copies of any documents your client gives you that you relied on to determine eligibility for, or the amount of the EITC.
Verify the identity of the person giving you the return information and keep a record of who provided the information and when you got it.
Keep your records in either paper or electronic format but make sure you can produce them if the IRS asks for them.
Keep these records for 3 years from the latest date of the following that apply:
The original due date of the tax return (this does not include any extension of time for filing.), or
If you electronically file the return or claim for refund and sign it as the return preparer, the date the tax return or claim for refund is filed, or
If the return or claim for refund is not filed electronically and you sign it as the return preparer, the date you present the tax return or claim for refund to your client for signature, or
If you prepare part of the return or claim for refund and another preparer completes and signs the return or claim for refund, you must keep the part of the return you were responsible to complete for 3 years from the date you submit it to the signing tax return preparer.
Tax Preparer Defense Attorney Houston
