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Double what I would charge for current year return and label it simply as "prior year return preparation". It isn't just about the software. The rules were different in prior years. You have to re-learn them for one client.

I look at it this way. Jack is right, we are the unpaid auditors for the IRS. We get paid by our clients. Has ANYONE on this board ever been subject to one of these compliance audits? I believe the answer is NO. Why? Because, we do the returns right. Our returns are not getting kicked out by the boat load with bad AOTC, CTC, EITC or other issues on a regular basis. I do my due diligence, and I send away those that do not meet my criteria to be my clients. Sorry, if you have all those above things, and I do not have any idea who you are and you just walked in off the street, you are walking back out. That is my defense. I do not believe that the IRS is going to go after a preparer with one bad return. They are looking for patterns, and if you have a number of stinky ones, then you are much more likely to get the visit. IF, for some reason the IRS shows up at my door to do a compliance audit on this issue, I should be in very good shape. And any issues that might arise? I pick up the phone and call the client and here comes the missing info. Rich

EITC is always a huge PITA to me just because I resent people getting it, even if they "deserve" it. And if you have a kid living with you, it should not be such an ordeal to cough up a dated document with the kid's name and your address. I have learned, however, that this is a Herculean task for some: "Oh, yes, these is a nice SS card. Now we can prove this child was born. Let me plow through this one more time." I realize my post did not add to the thread, but this just happened to me, and this is how I cope.

In thinking about this a little more, there is NO WAY I would advise a client to go ahead and file if the return includes a penalty (tax) under ACA. I'm not going to be the one holding the bag if something happens in the coming months to relieve them of the penalty and for some reason they can't get it back. I'll suggest an extension and then a "wait and see" approach. If they choose to go ahead and file, then I've given them the best advice, and they made the potential wrong choice.

Look at it as a positive. They long ago forced you to work as their unpaid data entry clerk. So becoming an auditor is a promotion.

Or you can can simply send them to the IRS's own FreeFile or TurboTax or Credit Karma etc and they won't be required to show any proof of anything to those services and file their taxes faster than the interrogation we are being asked to give them. But I digress... The 8867 and Due Diligence also do not stipulate what dates the documents need to contain Does the document need to prove more than 6 months of residency of the child in 2016? SO do we need a doctor's statement from January and another from July? What if the client only has a Jan 2017 document? It's mind-boggling... The IRS is slowly driving people to two different types of preparers... free or low cost online software on which they will probably make mistakes and not get the full refund they deserve, or shady fly-by night operations who will ask not questions and charge extremely high fees, and disappear after tax season. The honest, moderately-priced tax preparers are being squeezed out.

Rita: I like the way you cope.

Bottom line... If there is an error on a return with one of these credits, the preparer is to blame. We have all just become unpaid IRS auditors under the threat of penalties.

Yes I did at just over 3 and half hours. It was bitter sweet because the Rep I got was amazing. He was patient. He apologized twice for the other Rep disconnecting me. And best of all he was knowledgeable. He remoted in on my PC and was able to assist me. What happened was at the beginning of January ATX sent me a link to download the PaperlessPlus software but it still had the 2015 version. So that's why my activation code would not work. The two versions look almost identical. He was also able to clean up some networking issues and transfer my database over. I thanked him a million times. It was worth the wait. I am glad I didn't hang up.. I was tempted a few times.

Well, shoot! After reading this thread I called a broke, poor-devil, one-man-band Schedule C'er who'll have to cough up $695 soon and advised an extension to see how this plays out. Says he never got one before, is scared to start (superstition rules - what can you say?), hold off 'til 4-15, and he will talk to the preacher about it ("Is it right?"). Sure hope divine intervention from that Troubled Waters, Healing Hands, Rising Sun, and Souls Harbor outfit can do him some good 'cause I cain't.

The DECREE. Ah, yes. The bane of my existence. I wish I had a nickel for every time I said, "Hey, you know what, the Decree means absolutely zero in my world."

It sure seems like overkill at times but I have documentation from my daughter and son-in-law on my grandchildren. My next door neighbors do it also. No exceptions! It would seem like being overly cautious and thorough is the only method from now on. Might save some penalty money.

It's a PITA Differential. I wouldn't spell that out on an invoice. I'd call it a processing fee. But hey, we all know what it is.

I wouldn't charge a separate fee, but my fee to prepare these returns would be expansive, kind of like a balloon.

Here is an example of one PIA. The school forms have her ex's address because his mom pays the tuition, the activity forms have his address because they have his address because that is how his kid's can get into that location's sports and church has his address because they go to school there. I know that the kids live with Mom, because they are closely related to me. She is searching for something to prove that they live with her besides the decree. I have wasted way too much time trying to treat a freebie the same as everyone else. I would love to just use common sense, but I can't trust that no one else will claim the CTC.

It's okay to disagree with each other which is what makes this board so good. Why did they put that box (didn't rely on any documents) on the 8867 if you shouldn't use it? I appreciate all of the different positions taken. On the first link below there are examples to follow. The one that mentions the mother who wants to claim an infant does not make any reference to documents needed to prove the infant is her child. The question is rather the mother who lives with her parents is a dependent of her parents and if so disqualifies her for the EIC. The statement regarding the preparer being required to ask for additional information and documentation is based on whether the preparer feels the information received from the TP is accurate. Please understand I feel being completely diligent to protect us is paramount but do asset that common sense plays a role here as well. https://www.gpo.gov/fdsys/pkg/CFR-2012-title26-vol13/pdf/CFR-2012-title26-vol13-sec1-6695-2.pdf https://www.eitc.irs.gov/Tax-Preparer-Toolkit/dd/lawandregs

I don't have a definitive answer - even the IRS was not giving definitive answers in the webinar I watched. My personal opinion is that we should be careful, apply common sense, document what we do and treat all clients the same. One thing they emphasized was that you need to have office procedures in place regarding due diligence. If you have employees who prepare tax returns, and they don't ask the questions you have told them to, that is on them as preparer. But if you have given them any guidance as to how to follow due diligence, that might be on the firm and the firm face its own penalties. I sometimes seriously think about changing careers.

Those homeschooling the kids need to submit reports and the kids are tested periodically, and your clients should have some sort of records for this. Kids born at home still get an official birth certificate recorded with the state. Also, regarding those born at home, ask if the services of a midwife were used where paperwork may be available.

Catherine: Take along some of what was found in your the one MA office (facebook post) and share --- you can have one heck of a party! Like the idea of a webinar; live feed so everyone can enjoy. ELROD: Maybe a beginning of another career????

In some cases I suspect we are overthinking this. You still have the option to choose "did not rely on any documents" for all three credits. If I have a new client whom I know nothing about or if I suspect an existing client who is fairly new is not being honest, then I would ask for the documentation. The reason behind all of this is for us to attempt to determine the legitimacy of the credits the client is claiming in an attempt to prevent EIC and CTC fraud. It only makes sense that a client who has been claiming a dependency for the same kids with identical last names for 10 or more years is not committing fraud. Some folks are just stupid. I had a client once that tried to claim kids on a MFS return (lied about that too) when those same kids did not exist on their MFJ return which I prepared for a couple of years and then supposedly they split. We did not have to do any where near the due diligence then that we do now. I refused to prepare the return simply because I knew. Those are the ones we are to look out for. Personally, I would not ask for the documentation for each and every client in my data base. But, most definitely for a new client whom I have no prior experience. I would like to think that as professionals we know our clients and do not take the attitude to just shove them thru to get the revenue as some of the big corp preparers do.

That's endemic in this job, Medlin. We sympathize!

Archival software utility fee?

I agree with John and Judy. Sounds like a good plan to me.

I agree with John and Jack that it's too soon to know when this will be put into effect. We can suggest extensions for those clients that may be affected.

Fox is NOT tax authority. The IRS cannot pursue collection action on the penalties for not having insurance. This has been in place since the inception of the penalties (tax). Too much paranoia based overthinking way too soon.

The right click also works in the situation you just described. Drake usually provides multiple ways to accomplish the same task. By the way, if you haven't experimented with macros in Drake, you should do so. They can save you lots of data entry time, especially for repetitive entries.

PA is 3.07% of taxable so Balance of Tax = $1.01. The .01 is the kicker as $1.00 or less is disregarded. States want as much as they can get, just like all ALL government.

Agree with you on so many levels // BUT // IRS regulations do not say --- if we know or have known /// they are asking for substantiation for all ? AS IF each client is new each year // Disagree with "Terry D" on "did not rely on any documents" (his statement is true as far as MAYBE not getting called on the "due diligence by the IRS --- but I AM ANAL and protective of what little I have). Therefore, to keep the same policy and procedures for clients that fall into the credits we are discussing seems to be the prudent thing to follow. Some preparers may not and "that's OK" //// we all answer for ourselves --- again, I want to do what I can to alleviate what I can BEFORE hand. If it is not needed, I lost a bit of time // only. Even the Due Diligence requirements (again from 8867 - some bolding and size increase are mine to empathize): Document Retention To meet the due diligence requirements for the EIC, the CTC/ACTC and the AOTC, you must keep all of the following records. A copy of Form 8867; The applicable worksheet(s) or your own worksheet(s) for any credits claimed specified in Due Diligence Requirements, earlier; Copies of any documents provided by the taxpayer on which you relied to determine eligibility for, and the amount of, the credit(s); A record of how, when, and from whom the information used to prepare Form 8867 and the worksheet(s) was obtained; and A record of any additional questions you may have asked to determine eligibility for, -------------------- As to proof records: ----------------------------- Most might have a Doctor/health care provider; landlord (rental agreements usually specify "kids" allowed or cost more to rent??); church records showing home address; that can share some of the This is from the 8867 instructions: he following are examples of documents that you may rely on to determine taxpayers' eligibility for the credits or the amount of the credit. This list is not all-inclusive. Residency of a Qualifying Child School records or statement Landlord or a property management statement Health care provider statement Medical records Child care provider records Placement agency statement Social service records or statement Place of worship statement Indian tribal official statement Employer statement Disability of Qualifying Child Doctor statement Other health care provider statement Social services agency or program statement

it is very confusing and depending on who you talk to you get different answer

Making sense... good one. I actually get grief for making sense and giving accurate information. Some only want me to give them the answer they want, which I just cannot find it within me to do. Such is life. Thank goodness my greyhounds don't care! Coincidence. One today was from an owner/employee who was asking how not to give themselves a paycheck, yet they wanted a W2. Needs a report like an employee, is an employee, needs to get a paycheck for all time worked, at least minimum wage, at least as often as required by their state, and if an owner, must be what the IRS will accept as a "reasonable" wage. I got a nasty gram back for not answering how to do what they want to do.

Dear Medlin:

See last paragraph/question IRA FAQs - Distributions (Withdrawals) Distributions while still working Can I take money from my traditional IRA, or my SEP or SIMPLE IRA, while I am still working? You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you're under age 59 1/2. The additional tax is 25% if you take a distribution from your SIMPLE-IRA in the first 2 years you participate in the SIMPLE IRA plan. There is no exception to the 10% additional tax specifically for hardships. See chart of exceptions to the 10% additional tax. Do I request the distribution check directly from my employer or from the financial institution where contributions to my SEP or SIMPLE IRA are invested? You will need to contact the financial institution holding your IRA assets. If I withdraw money from my IRA before I am age 59 1/2, which forms do I need to fill out? Regardless of your age, you will need to file a Form 1040 and show the amount of the IRA withdrawal. Since you took the withdrawal before you reached age 59 1/2, unless you met one of the exceptions listed in Publication 590-B, you will need to pay an additional 10% tax on early distributions on your Form 1040. You may need to complete and attach a Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, to the tax return. Certain distributions from Roth IRAs are not taxable. Can I deduct the 10% additional early withdrawal tax as a penalty on early withdrawal of savings? No, the additional 10% tax on early distributions from qualified retirement plans does not qualify as a penalty for withdrawal of savings. Will I have to pay the 10% additional tax on early distributions if I am 47 years old and ordered by a divorce court to take money out of my traditional IRA to pay my former spouse? Yes. Unless you qualify for an exception, you must still pay the 10% additional tax for taking an early distribution from your traditional IRA even if you take it to satisfy a divorce court order (Internal Revenue Code section 72(t)). The 10% additional tax is charged on the early distribution amount you must include in your income and is in addition to any regular income tax from including this amount in income. Unlike distributions made to a former spouse from a qualified retirement plan under a Qualified Domestic Relations Order, there is no “divorce” exception to the 10% additional tax on early distributions from IRAs. The only divorce-related exception for IRAs is if you transfer your interest in the IRA to a spouse or former spouse, and the transfer is under a divorce or separation instrument (see IRC section 408(d)(6)). However, the transfer must be done by: changing the name on the IRA from your name to that of your former spouse (if transferring your entire interest in that IRA), or a trustee-to-trustee transfer from your IRA to one established by your former spouse. Note: an indirect rollover doesn't qualify as a transfer to your former spouse even if the distributed amount is deposited into your former spouse’s IRA within 60-days. See Retirement Topics - Divorce Required minimum distributions How much must I take out of my IRA at age 70 1/2? Required minimum distributions (RMDs) must be taken each year beginning with the year you turn age 70 1/2. The RMD for each year is calculated by dividing the IRA account balance as of December 31 of the prior year by the applicable distribution period or life expectancy. This rule does not apply to your Roth IRAs. You can determine your distribution period or life expectancy by using the Tables in Appendix B of Publication 590-B Distributions from Individual Retirement Arrangements (IRAs). Table I - for beneficiaries. Table II - for owners whose spouse is 10 years younger and the IRA's sole beneficiary Table III - for all other owners (most IRA owners will use this table) See the discussion of required minimum distributions and worksheets to calculate the required amount. I am over age 70 ½. Must I receive required minimum distributions from a SEP-IRA or SIMPLE-IRA if I am still working? Both business owners and employees over age 70 1/2 must take required minimum distributions from a SEP-IRA or SIMPLE-IRA. There is no exception for non-owners who have not retired. Qualified charitable distributions What is a qualified charitable distribution? Generally, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity. See Pub. 590-B, Distributions from Individual Retirement Arrangements (IRAs)) for additional information. Can a qualified charitable distribution satisfy my required minimum distribution from an IRA? Yes, your qualified charitable distributions can satisfy all or part the amount of your required minimum distribution from your IRA. For example, if your 2014 required minimum distribution was $10,000, and you made a $5,000 qualified charitable distribution for 2014, you would have had to withdraw another $5,000 to satisfy your 2014 required minimum distribution. How are qualified charitable distributions reported on Form 1099-R? Charitable distributions are reported on Form 1099-R for the calendar year the distribution is made. How do I report a qualified charitable distribution on my income tax return? To report a qualified charitable distribution on your Form 1040 tax return, you generally report the full amount of the charitable distribution on the line for IRA distributions. On the line for the taxable amount, enter zero if the full amount was a qualified charitable distribution. Enter "QCD" next to this line. See the Form 1040 instructions for additional information. You must also file Form 8606, Nondeductible IRAs, if: you made the qualified charitable distribution from a traditional IRA in which you had basis and received a distribution from the IRA during the same year, other than the qualified charitable distribution; or the qualified charitable distribution was made from a Roth IRA.

You all need to consider Drake! Lower cost. Excellent technical support Over 50,000 users I used ATX prior to their being absorbed by . They made my mind up for me with all of the bait and switch, fixed assets were free and then they weren't, price increases, etc. Drake works quite well in most scenarios as all software has its workarounds. Mike Dubin CPA

Older NY licenses have the DLN on the front lower right corner in tiny print. Don't forget to deduct the magnifying glass you'll be buying for your office. Newer NY licenses have the DLN on the back, so if you client is uploading a copy to your portal, require the front AND back to be safe. The change was 28 January 2014.

Keep in mind that some are asking for date of issue and date of expiration. Therefore a copy of each (primary and secondary taxpayer) drivers license may be needed for the correct data entry year to year. It will be interesting to see what is acceptable going forward for those that have no drivers license or those younger/older but still filing, etc.. /s Remember /// government gets its "teeth" in and only grows requirements but seldom lessons them.

looks like a nice phone

At least they haven't mailed the 4th quarter/annual payroll forms yet, so the only thing will be a penalty for late 941 deposit. Thanks everyone for your advice

Please read this when you cannot sleep: http://www.worldwideerc.org/Blogs/MobilityLawBlog/Lists/Posts/Post.aspx?List=c020aee5-48ad-47b2-8295-a4cf71ba9e34&ID=94

Based on my experience, Medlin is correct. Not a loan, not a 1099. Most likely W - 2 Wages.

For me, it is soon to be 24 years... Still have not seen or heard "it all". Learned plenty though. Some I can share. Oldest son has a job installing/repairing a certain thing. When installed/repaired, they tell their clients not to do a certain SIMPLE thing. They do not listen, and have to pay for late night and holiday repairs. Son said something about people not listening. I pointed out those people had money they want to give to him, so smile, give the advice again, and cash the checks (and get those checks up front). Happy customer, happy wallet for son, win-win.

I could do Facebook Live. I think I then can post the archived video on Facebook also. Elrod certainly deserves a large audience.

Live stream? Web cam?

I don't know if I can make it during tax season - maybe a special performance after?

I'll share Elrod.

And I'm in (long-ish) driving distance from @Lion EA so if she warns me I'll drive down to watch!

In regards to @JimTaxes' item #4, we were told that a printout from the bursar's office and/or proof of payments made from the client are also required. Why? Because it's well known that far too many 1098-T's are actually candidates for the Great American Novel and bear no resemblance to reality.

The IRS SB/SE had a webinar last week that I attended. From what the IRS experts said, due diligence has not changed it just now applies to CTC and AOTC. Basically, they said we have to ask sufficient questions to satisfy a prudent person that the information provided is consistent, correct and complete. If we have any reason to suspect it is not, we must ask additional questions and for additional documentation. They cannot tell us what questions to ask because it varies from situation to situation. If we feel the need to see any documents, we must retain copies of those documents. We must attach Form 8867 to all returns. No problem if e-filing; however, if a paper return comes in without the form it is our fault even if we provided the copy to the taxpayer with instructions to send it as part of their return. Penalties are $510 per return per credit. So a single return could generate $1530 in penalties if all three credits are involved.

This issue is very much a moving target and I won't make any assumptions about timing. The one major experience we have in this area is the silliness that surrounded the $100 per day penalty, which for most employers was rescinded retroactively (although there was no mechanism for initially imposing it, as there is with the coverage penalty). If I have any clients who are significantly affected by the penalty, I'm going to suggest that they file an extension and let's see what happens in the coming months. That will be cheaper for them than paying me to amend a return if the rules change in their favor later in the year. Of course if they have a significant refund in spite of the penalty, then they probably won't go for that. But at least they will be on notice that if they just can't wait, and if things subsequently change, the the additional work won't be a freebie.

Definitely! Looking forward to it. I'm ready for your performance.