Mr. Pencil

Great post!. It is more proof that ACA is settling in as an accepted part of the general economy, finding support in the capital markets. I'm sure H&R will give it plenty of favorable publicity in the next few months. It's also interesting that Liberty's survey, though tiny, confirms Obama's estimate of uninsured Americans. t

Just wondering

No--technically it is NOT in order. There is a 1098 that says he spends more money than he has. That discrepancy MUST be resolved before the return can be signed. Maybe he feeds his family at the restaurant. That's a good answer, and I probably wouldn't question whether that constitutes a taxable fringe benefit on the W-2. But that still wouldn't explain the cash flow problem. Maybe he gets gifts from overseas. That one I probably would question a bit more to see if it is taxable income or subject to FBAR, etc. That is not violating anyone's privacy, but rather understanding the context of information already provided. If the client doesn't want to answer the questions, he doesn't have to! The questions are identical whether EIC is involved or not, and in neither case does he need records if his answers are otherwise consistent and complete. Records of course are usually the easiest way to get there, and I scan any records EIC or not. So the only difference in terms of due diligence is that I am required to keep records that I copy anyway. Somebody wondered if my clients tell 100% truth. Well, I'm sure they do and it's just a coincidence that not a single one has ever been called to jury duty! I have no reason to know that they sold something for $50, though I daresay I've had a few discussions about theoretically selling things. But bank interest, yes, if they had an account last year it will be on their organizer and I will always ask and annotate. So I'm not a detective but I don't ignore the implications of information they give me. Karen Hawkins seminars notwithstanding, it's really not that big a deal.

Sign what? Where? He's already signing the tax return under penalty of perjury, so what good is signing something else not under penalty of perjury? How can he sign off the professional's responsibility anyway? Why would a professional sign a return under penalty of perjury when she doesn't believe it is true? Even worse, why would a professional want to sign under penalty of perjury, KNOWING that it is false? And I don't mean the client data. If a professional feels "my job is to take the papers he gives me," why not have him give the papers? Weird.

I don't understand the question, or why there even is a question. Form 8867 quotes Circular 230 in boldface, "You may not ignore the implications of information furnished to you or known by you, and you must make reasonable inquiries if the information furnished to you appears to be incorrect, inconsistent, or incomplete." So at that point the preparer either gets the answer or ends the engagement. Either way, how can it be #1? For those who think the math is "impossible," try this. An intact family with both parents WORKING FULL-TIME at minimum wage like the major corporations pay--eligible for EIC? That's why I called complaints about EIC "the same old prejudice that the working poor are lazy or worse."

Fear has always been one the agency's most important tools. And that's been a boon to our business, though we are not usually as blatant as the HRB ads. Good or bad it's a part of our professional environment and we need strategies for it the same as we do for IRS timetables. I still follow the ethic I learned at Block 20 years ago, that audits are a normal part of the tax system and our clients in particular have the advantage of professional representation. In this thread I have tried to focus on eligibility issues because truth is still one of the best defenses. I have a balanced caseload, and don't worry much about IRS targeting. If I had a lot of EIC family relationships would get more attention, just as I would look more closely at compensation if I did a lot of pass-through entities, or housing if I specialized in clergy. Karen Hawkins does not scare ME (maybe if I went to her seminar....) If she's good at her job, fine. I think many preparers should be scared of her, and I expect and support increased oversight. [Which reminds me--I gotta renew my PTIN.)

The taxpayers would be able to get info to support their claims for qualifying children. By the time of the audit, it would be too late because obviously the return would have not been prepared with due diligence. My point remains that the same information would be required for dependents even if they weren't eligible for EIC. Tiebreaker rules are part of eligibility, so it is reasonable to determine if the natural parent is claiming the child.

Wow, that's quite a town you've got! But every one of those problems should be easy to verify through Child Protective Services. So let me ask a third time, the same thing His Honor will only ask once, how did you document any of that?

Thanks for that info. The term "birth certificate" doesn't actually appear anywhere on the form or instructions, but I can understand why IRS might focus on potentially "borrowed" children. I'd better watch out for that one. The form asks why the parents are not claiming the child, a reasonable question along the lines of "incorrect, inconsistent, or incomplete" information. What answer are you trying to get the IRS to accept? 34 times.

How important IS it? I don't give significant tax or investment advice, I'm pretty good with documentation, and I don't take aggressive positions anyway. So I consider my risk very low.

Terminating S-status does not revoke the election to be taxed as a corporation. (Reg. 301.7701-3( c)(1) might address that.) But be careful--if the new shareholder comes on 12/31, you must file two short years! Unless that's what you want, have the termination be effective on the FIRST day of the next tax year.

Which district, and why not Tax Court? If your position is that the law does not specify a birth certificate, what alternate documentation have you offered? If other claims were allowed, what documentation did IRS accept on the same points? Is the IRS alleging similarities in the claims? As I posted earlier, I think the due diligence requirement is very vague and weak, nothing more than already provided by regulation and industry standards. I hope that means IRS is only using it to target abuse, but your experience might give me a different perspective.

How does this encourage people to pay their tax? Oh well, it is what it is. Low income taxpayers can get a $43 agreement by filing a financial statement. Anybody can get $52 with electronic funds transfer. Online approval is automatic up to $50,000, while a written request requires financial disclosure over $25,000. So there are some ways we can help clients, including filing the request. And don't forget that payment within 120 days does not require an agreement or user fee (just penalty and interest). Even beyond that I advise clients to just send in payments without paying the user fee for a formal agreement.

Did you get all you need, Jack?

Yes, if the brokerage work meets the criteria for material participation it can count towards RE professional status. But to deduct losses the rental activity must also have material participation, which is usually not the case unless he can group multiple properties as an economic unit. One of the problems is that he can't bump up his hours by doing repairs and maintenance which would normally be done by a contractor or service.

Congratulations on getting basic agreement from the agent!

Okay, I'll take that as an answer. I'm not sure why your software makes you do that because there is no place on Form 8867 to write it. Maybe the IRS will adopt your software's limitations; then I too will refuse the engagement if I don't want to say where I got the information.

Perhaps "ignore" is the wrong word. I set up my software to file Form 8867, and it's on the invoice. I just do not specifically complete it in my normal process. Still, you have a fair point. Generally I do strongly support the Instructions [as I recently did in the thread "2013 Publication 17--Ready"]. For example, I have been critical of preparers who do not want to list every individual trade on Schedule D/8949. On the other hand, I will use Line 21 for a community property wage adjustment, even though the instructions say Line 7. But the IRS knows about and expects this common alternate treatment, and I want the W-2 to match. In both these cases my purpose is to give accurate information in the way that will minimize audit risk to the client. Form 8867 has no audit risk for the client. I don't usually bother with checking the boxes, because it would only take a few minutes to demonstrate due diligence if the IRS should ask to see the file. Are the documents even required? No, of course not. Nothing says so. In fact one of the boxes just indicates that you aren't checking any boxes! The organizer questions and notes are all that is needed--exactly the same data already obtained for income and qualifying child. I don't audit my clients. I may need to clarify some points, but once I get answers that are reasonable and consistent the interview is complete. Unless I know or have reason to know the answers are false, I have no further obligation.

Name ANY thing a preparer has to do for Form 8867 (except document retention) that is not otherwise required by the code, regs, or Circular 230.

Personally I ignore Form 8867. It puts NO additional requirements on preparers except retaining documents, and I scan everything for everybody anyway. This is another reason why high-end software is totally worth the extra cost for the increased productivity. Lacerte defaults to filling out the EIC worksheet and Form 8867 automatically from entries already made in the normal course of work. I do a thorough interview based on the organizer, and pay no more attention to EIC than to the Child Tax Credit. I explain it if it shows up on the summary for current or prior year, or the client otherwise asks about it. I almost never include it even for planning purposes. I consider preparer complaints about EIC to be nothing more than the same old prejudice--that the working poor are lazy or worse and don't deserve a tax break.

"Much" action??? Even when the budget debate shut down the government, none of them mentioned the expiring tax cuts already scheduled. Both parties are promising "tax reform" in 2014, but neither side has political momentum. The chairman of the House Ways & Means Committee terms out next year, and the chairman of Senate Finance is resigning from Congress altogether. In my opinion, neither party wants to extend those cuts because, a.) they want the money, and b.) they want to blame the other guys.

Merry Christmas! There are many nice things about this time of year, but for anyone not associated with a particular Christian church, I invite you to attend one of the concerts, fellowships, or rituals in your community. Happy new year! If you don't already have your resolutions in order, may I suggest the following? I know of none better. On my honor I will do my best to do my duty to God and my country, to help other people at all times, to keep myself physically strong, mentally awake, and morally straight.

Most tax preparers would probably refuse this request, citing IRS ethical standards. Without a written authorization to release information, there would be little defense against a malpractice suit if the landlord denies the application. Even with a release, fax is basically NEVER considered a reasonable business practice for handling confidential information because there is no control over who has access on the receiving end. It was different in the past, but nowadays the professional approach is to hand the letter to the client personally. Period.

California has provided tax account info online for several years. Invaluable for verifying estimates and other payments. Security is pretty weak--you just need SSN and AGI--but it's not as much information as IRS transcripts. Do you think IRS will post the income transcripts (W-2/1099) before April 15?.

Exactly! When the other 96% hear about those notifications, they'll be scared into doing the right thing. That's how the government efficiently uses limited resources.