David1980

I still suspect that while some of this does happen probably more of what's actually happening is bad preparers are denying filing fraudulent returns. It's nothing new, but with the additional ID theft data the IRS is collecting it probably changes the bad preparers stories. Before, the IRS would inquire about a bunch of fraudulent returns that were sent by an EFIN and the ERO would claim they didn't efile those returns. IRS assumes EFIN was compromised and shuts down the EFIN and issues the ERO a new one. Now with the ID theft data, the ERO makes the same claim and the IRS responds "But it was your computer." Thus the bad preparer is going to claim someone must have remotely controlled their computer to submit the bad tax returns that way. At that point, the IRS can either call ERO a liar or they can accept the story. Given budgets and costs I'd bet most of the time it's not in the IRS best interest to try to build evidence and argue and so they instead accept the bad preparers claim that someone remotely controlled their computer to file the fraudulent returns. Resulting in IRS warnings to the community that hackers are targeting preparers and submitting bad returns that way. That said, the possibility of a hack scares me that I'm paranoid about security on any computer with tax data. Not because I'm worried about someone filing fraudulent returns through my computer but rather because I'm worried about someone obtaining taxpayer data from my computer. The IRS warnings might cause some people to improve computer security which is absolutely a good thing. There's no down side to the warnings.

You have to be careful with the word "legal" - yes, legal at the state level. However section 280E still applies. I've been approached but never prepared a return for a marijuana business. It seems once I explain 280E they don't want me to do their return. I can't know, but I'd bet most of them shop around for someone who is unaware or willing to ignore 280E. Also see memorandum 201504011.

It could help with those taxpayers that want to file a return as soon as possible to get their refunds as soon as possible. Once they understand that they're not getting a refund prior to 2/15 at any rate. Right now they try and file as soon as they can and often that means W-2 and 1099 for small jobs and the such that they forgot about being received after they've filed a return. Really 2/15 isn't all that much of a delay - a couple weeks later than normal?

Congress decides the funding, IRS has to decide what to do with the funding that they receive.

Under age 25, claimed as dependent, etc... Try "EIC in a Nutshell"? https://www.irs.gov/publications/p596/ar01.html#en_US_2015_publink1000297316

Yeah, I tried encouraging someone to send email for their questions because they tended to ramble on about a lot of unrelated stuff when they called. Now I get email from them. "Can you give me a call? I've got a question."

Yes, passed as part of HR 2029 "Protecting Americans from Tax Hikes Act of 2015". Retroactive claims also not allowed for CTC or AOC either.

I wouldn't see this as much different than preparing returns for H&R or another tax business. I would expect them to do pretty good on the overall legality and processes. They probably even handle record retention and all that. What I would fear is they'd pressure me into doing something I didn't want to do. Preparing questionable EIC returns for example or giving people work that is beyond their skill. My name, my PTIN is ultimately there on the return if preparer penalties happen.

Yup, that's exactly what I'm talking about with preparer EIC fraud. Apparently that one in jail failed to have a fall guy (or was he the fall guy)? One way I've seen these done is someone hires employees/sells franchises/whatever to "tax preparers" (often immigrants in their early 20's, people looking to start a new business, and so on) and trains them on how to create large refunds through refundable credit fraud. That way if caught the blame is put on the preparer. As for HRB, Liberty, and so on the national chains have some bad preparers but I'd be shocked if they were doing anything like that. It's more likely a few bad apples at the national chains rather than the entire company being corrupt. Those aren't the ones I think of when I talk about preparers intentionally claiming fraudulent EIC. I think of the office that does 2,000 returns and every single one is a "hair braider" or "baby sitter" or whatever generic business type they use with similar income and dependents with different last names. I'd love to see the statistics on the percentage of EIC claims made by preparers excluding those ones.

"The tax returns to be examined are selected using an effective risk-based audit selection model, resulting in a change rate of more than 90 percent." - probably less to do with their "effective risk-based audit selection model" and more "high fraud rate". Like shooting fish in a barrel. "Last year there were more than 67,000 two-year bans and 45 10-year bans in effect." - wow those are disappointingly low. 45 total 10-year bans in effect? I'd consider anyone who has repeatedly reported fake income to obtain EIC filing fraudulent returns and there's way more than 45 of those. It looks to me like the IRS is doing ... almost nothing ... with the information they have available to cut down on the EIC fraud. Instead, they want paid preparers to do the work. But this won't work because probably a significant portion of the EIC claimed on returns prepared by paid preparers are done by fraudulent preparers that file bogus returns with inflated refunds. They're not filing bad EIC claims because they didn't know better but rather because their intend is to file bad EIC claims. The IRS has to do more than send letters. Even the $500/return penalty doesn't matter when you make more than $500 a tax return. They need to put those preparers in a jail cell or deport them.

True, though I'd paper file it anyway to get it timely filed in case some other income pops up at a later time. Wouldn't be a happy taxpayer if they discover they "forgot" a $50k pension distribution and the refund turns into a significant balance due with FTF penalties.

Also worth considering: Would you want to e-file this return even if you could? The e-file perfection period for a 1040 is 5-days. E-file a 1040 today and the return would be considered late. Paper-file a rejected tax return today and assuming it was rejected 4/11 or later it is on time.

From pub 1345: If the taxpayer chooses not to have the electronic portion of the return corrected and transmitted to the IRS, or if the IRS cannot accept the return for processing, the taxpayer must file a paper return. In order to timely file the return, the taxpayer must file the paper return by the later of the due date of the return or ten calendar days after the date the IRS gives notification that it rejected the electronic portion of the return or that the return cannot be accepted for processing. Taxpayers should include an explanation in the paper return as to why they are filing the return after the due date.

Get a copy of the IRS transcripts to see what was filed maybe? Probably a good idea to mail the extensions regardless though.

Probably the same would be true about the returns on extension and Oct 15.