IRS Takes Action to Ensure Accurate Tax Preparation by Preparers
by Green S. CEOThe IRS has been sending out letters to income tax preparers for the past few years reminding them of their obligation to prepare accurate tax preparation returns on behalf of their clients. During the month of November, the IRS started sending out letters to more than 21,000 tax preparers across the country. The reason for these letters is because the returns prepared during the past tax season have shown a high percentage of inaccuracies and misinterpretations of the tax law. The agency will be focusing on preparers who prepared a large number of individual returns with Schedules A (Itemized Deductions), C (Profit or Loss from a Business), and E (Supplemental Income or Loss) during the past filing season.
The letter
contains an enclosed documents related to Schedules A, C and E. The documents
address some tax issues that the IRS review considers to have been
misunderstood or misinterpreted.
Tax return
preparers are expected to be knowledgeable in tax law. They are expected to
take the necessary steps to file an accurate return on behalf of their clients.
These steps include reviewing the applicable tax law, and establishing the
relevancy and reasonableness of income, credits, expenses and deductions to be
reported on the return.
In general,
preparers may rely on good faith client-provided information. However, they can
not ignore reasonable inquires if the information furnished by their client
appears to be incorrect, inconsistent with an important fact or another factual
assumption, or is incomplete. Tax preparers must make appropriate inquiries to
determine the existence of facts and circumstances required as a condition of
claiming a deduction or a credit.
Both the tax
preparer and their clients may be adversely affected by incorrect returns.
These consequences may include any and all of the following:
• If their
client's returns are examined and found to be incorrect, they (the client) may
be liable for additional tax, interest and penalties.
• Preparers
who preparer a client's return for which any part of an underestimate of tax
liability is due to an unreasonable position can be assessed a penalty of at
least $1,000 per tax return.
• Preparers
who preparer a client's return for which any part of an underestimate of tax
liability is due to recklessness or intentional disregard of rules or
regulations by the preparer, can be assessed a penalty of $5,000 per tax
return.
The letter
further goes on to state that preparers in addition to their responsibility to
exercise due diligence in preparing accurate tax returns for their clients
should also be aware of the IRS's tax return preparer requirements. This
includes entering the Tax Preparer Identification Number on all returns
prepared for compensation and adherence to the electronic filing requirements.
IRS revenue
agents will be conducting 2,100 compliance visits nationally with members of
the tax preparer community. The purpose of these visits is to make sure that
preparers are complying with the current return preparer requirements and to
provide information on new preparer requirements effective for the 2012 tax
season. These visits are expected to start in November 2011 and be completed by
April 15, 2012.
Taxpayers
should be careful when choosing a tax preparer. While most paid preparers
provide honest and excellent service to their clients, there are some that make
common mistakes or engage in fraud and other illegal activities.
Reputable
preparers will ask to see receipts and other documentation when preparing a tax
return. They will ask numerous questions to determine whether expenses may be
claimed as deductions or qualify for favorable tax treatment. By choosing a
reputable preparer you can avoid additional taxes, interest and penalties that
could result from an examination of your tax return.
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Created on May 14th 2020 15:53. Viewed 155 times.