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.

No to the current year NOL question. In calculating a NOL you are not permitted a deduction for personal exemptions, capital losses in excess of capital gains, section 1202 exclusion, nonbusiness deductions in excess of non-business income, the net operating loss deduction, or dpad. So starting with line 41 of the 1040 you have to add back the nonbusiness deductions in excess of non-business income and that -5,914 becomes +6,286. No 2013 NOL. Looks like they'll still have a lot of their prior NOL left though.

Another thing to watch out for is sometimes they are looking at per diem rates for lodging and the employer is giving them per diem rates for meals and incidentals. Since they know the deduction as simply "per diem" they don't realize one is allowed as a deduction for them and one isn't or sometimes even what expenses the per diem is supposed to cover.

Unfortunately there are taxpayers that want precisely that. Well, they don't want to be scammed but they aren't looking for a legitimate tax return either. Since most returns don't get audited the bogus return will get a refund most of the time -- depending on how the preparer is lying on the return to create the refund at least. Lie about tax withheld and obviously the IRS matching system will catch it. Lie about a Schedule C with losses or listing non-relatives as qualifying children for EIC and odds are the taxpayer won't get audited (unless multiple people claim the kids, for example.) But I'm sure when they do get caught they throw their arms up and complain about being scammed. I don't have any sympathy for them when it happens (and I wish it would happen more). You intentionally go looking for someone who can get you a refund guaranteed you got to know your return isn't going to be honest.

4852 works as a substitute for a missing 1099-R as well as a missing W-2. Assuming you've got the info I'd go that route.

Agree with Jack. I'm not aware of any exceptions for issuing a 1099-R for a Roth IRA distribution. Roth IRAs. For distributions from a Roth IRA, report the gross distribution in box 1 but generally leave box 2a blank. Check the “Taxable amount not determined” box in box 2b. Enter Code J, Q, or T as appropriate in box 7. Do not use any other codes with Code Q or Code T. You may enter Code 8 or P with Code J. For the withdrawal of excess contributions, see Roth IRA, later. It is not necessary to mark the IRA/SEP/SIMPLE checkbox.

Different scenario there. In that scenario there is a 1099-R code G received by the taxpayer. In this one, there is no 1099-R at all. There is no rollover so a code G does not apply. If this was a direct rollover from say a 401K to an IRA you would have a 1099-R box 7 code G. Because it is a trustee-to-trustee transfer from a Roth IRA to a Roth IRA a 1099-R isn't required. Transfer vs. Rollover. Not the same thing. In the rollover scenario I agree that if a 1099-R is issued you need to include something on the return even though it's a rollover.

From a Roth IRA to a Roth IRA, trustee to trustee? No 1099-R necessary, nothing needed on the 1040. Transfers Generally, do not report a transfer between trustees or issuers that involves no payment or distribution of funds to the participant, including a trustee-to-trustee transfer from one IRA to another IRA, valid transfers from one section 403(B ) plan in accordance with paragraphs 1 through 3 of Regulations section 1.403(B )-10(B ), or for the purchase of permissive service credit under section 403(B (13) or section 457(e)(17) in accordance with paragraph 4 of Regulations section 1.403(B -10(B ) and Regulations section 1.457-10(B )(8). However, you must report: Recharacterized IRA contributions; Roth IRA conversions; Direct rollovers from qualified plans, section 403(B ) plans or governmental section 457(B ) plans, including any direct rollovers from such plans that are IRRs or are qualified rollover contributions described in section 408A(e); and Direct payments from IRAs to accepting employer plans.

Problem there is the bank products folks have too much power. Imagine if HRB and other giants no longer were able to use the refund to pay their fees? Keep the bank products and the refund is going to a temp account in the name of the taxpayer whether the taxpayer really asked for it or if it's identity theft.

I would not be surprised if the number was actually lower. That there is $4 billion (and much more I'd expect) tax fraud payments is not a shock. What I think happens is some of the tax fraud people when caught go "Wasn't me!" and it gets labeled as identify theft, since it is so easy to point the finger at identity theft right now. Which is because identity theft is big. Systematically defrauding the US government is an offense that needs a greater punishment, whether that's filing fraudulent returns for willing taxpayers or filing identity theft returns. File 100 returns and claim an education credit on every one completely fraudulently you should be deported or jailed depending on citizenship. Make the penalty harsh. Go after the traitors. I guarantee you the numbers will fall. I also would not be surprised if the number was actually higher. As kcjenkins said, that's only the ones that were caught. IRS seems to underestimate fraudulent pay outs because they can't be sure that it's all fraudulent so rather than estimate they give the lower number that they are sure on. Manipulating the numbers not unlike the financial manipulation that has been done by the big banks...

What'd they do last year? Is it possible to obtain a copy of the prior year return and file the same way? Or is it a new business for them?