IRS Launches This Year's EITC Audits

[kcjenkins]

The IRS is starting this year's Earned Income Tax Credit due diligence compliance audits of return preparers.

To select preparers for audits, the service will "look at returns with a high chance of errors competed by the same preparer," according to the EITC Central section of IRS.gov.

The audits review at least 25 EITC returns for the preparer's due-diligence records, the "probing questions asked" and the client's responses, and all questionnaires, checklists and worksheets.

Audit visits will also include a review of EITC claims for compliance with Revenue Code Section 6695(g). Compliance requirements include:

Completion and submission of Form 8867;

Completion of the EITC worksheet;

Compliance with the "knowledge" requirement; and,

Compliance with record-keeping requirements.

Non-compliant return preparers face penalties of $500 per return and other consequences.

IRS auditors will also review a preparer's PTIN registration status and personal federal tax filing requirements.

The service's EITC Central contains more information on preparer EITC due diligence training resources.

The IRS estimates that between 21 percent and 25 percent of EITC payments were issued improperly during fiscal 2012, or approximately $11.6 billion to $13.6 billion. Those estimates may be understated.

[Guest Taxed]

This should be a wake up call to all of us who prepare EITC returns. Some of my clients hate it that I ask those same questions again and again and ask for documentation.

They tell me how many times do I have to tell you. My response as many times IRS wants me to ask you and I have to keep records.

[JohnH]

You could always give them the option to pay you an extra $500 fee for each return you prepare for them, to be returned after the SOL has expired for each said return. The eventual refund would need to be reduced by some sort of fee for maintaining the extra record keeping, of course. . :)

[Guest Taxed]

Good idea. I see two outcomes. Either they head for the exit or they agree to cooperate with me.

[taxxcpa]

If they want to review 25 of my EIC returns, they will be out of luck. I only have one that I do for the mentally impared son of a client who sacks groceries and makes enough to get some EIC. The client used to claim him, but the client retired from his job and diminished his rollover IRA to the point that his income is too low to benefit from claiming the son whose income is sufficient to provide half of his own support.

[MsTabbyKats]

Do you think H&R or Jackson Hewitt asks for and keeps these?

I don't do many....and have been doing the ones I do for years....so I checked "no documents....but made notes in the file". I wonder if this option will be gone.

[Guest Taxed]

Not sure about H&R, but I interviewed a taxpreparer from Liberty this season and yes they require Driver's license or other photo ID and kid's ss card to do EITC returns. Also remember they push the bank products for those returns and most taxpayers accept it.

[MsTabbyKats]

Not sure about H&R, but I interviewed a taxpreparer from Liberty this season and yes they require Driver's license or other photo ID and kid's ss card to do EITC returns. Also remember they push the bank products for those returns and most taxpayers accept it.

But a SS card doesn't prove that the kid lives with you. That's what they want to document. School records, medical records, statements from church.........etc etc

I'm a tax preparer.....I'm not a detective

I am sure that I will retire "by attrition"...........

[Guest Taxed]

None of the documents that you stated can conclusively prove that the child actually slept in your home. I know families who have split and the child goes to a school system that is in a different district than the district where they actually sleep.

We have to get the statement of the taxpayer claiming it and make a note of it. I actually have the taxpayer sign my copy of the checklist.

[MsTabbyKats]

A school record would have the kid's home address.....

This has been a NYS thing for years......

If the client is asked for proof...and can't prove it.....I don't get involved. I tell them beforehand that they may be questioned....and if so...they could lose the credit.

I don't get involved with where people are sleeping....and where the kid does his homework. Around here they generally and unofficially live with grandma....and mama generally doesn't live where her W-2 says anyway.

[Guest Taxed]

>>> Around here they generally and unofficially live with grandma....and mama generally doesn't live where her W-2 says anyway.

I don't think that fact is limited to NYC. I think it is much more widespread and I think IRS knows too.

[ILLMAS]

SS card is enough proof, most would agree we are not child services. The IRS has to make it clear what documents proves the child lived with the parents. Please let's join hands and repeat, if the parent provides one of the documents to fulfill the tax preparer due diligence requirement then we should fear no evil.

[Guest Taxed]

Like you said we are not child services. I can only go by the documents they provide and their statement which I record in the checklist and have them sign. If they lie to me, it is on them not me. I am not the truth seeker.

[MsTabbyKats]

SS card is enough proof, most would agree we are not child services. The IRS has to make it clear what documents proves the child lived with the parents. Please let's join hands and repeat, if the parent provides one of the documents to fulfill the tax preparer due diligence requirement then we should fear no evil.

SS card proves only that the child has a SS number....nothing about where he lives or who supports him.

The IRS has made it clear what proves where the child lives. School records, medical records...with the child's address; a lease or mtge or re tax bill in your name; a utility bill to prove support.

A few years ago I had several EITC clients that were questioned.

When one had to submit proof...he told me...."Oh, those kids are actually nieces/nephews and they moved back to Africa."

Another example...mom lived at XXX Lexington Ave. Dad lived with his mother right across the street. The 4 kids slept in both places and lived in both places equally. I did HOH twice, giving each parent 2 kids. Mom never had a problem. The IRS wanted "proof" from dad. Because he lived with his mother...and the apt was in his mother's name....the IRS disallowed the credit (although he was actually paying the bills).

And a few that didn't have IRS issues had NYS issues.

So....I avoid these now....unless I'm confident that they can prove "whatever" if asked.

[Gail in Virginia]

We don't do many of them either, but I did have one a few years ago that had to prove the children lived with him. In my experience, which is not extensive as I said, the IRS typically only questions the fathers about where the children live. Highly discriminatory in my opinion. Quite a few fathers wind up being more of a parent than the mother.

[Guest Taxed]

For whatever reason there is a general thinking that the mother is the primary caregiver of her children. So some responsible dads get the short end of the rope during custody proceedings.

[Jack from Ohio]

We don't do many of them either, but I did have one a few years ago that had to prove the children lived with him. In my experience, which is not extensive as I said, the IRS typically only questions the fathers about where the children live. Highly discriminatory in my opinion. Quite a few fathers wind up being more of a parent than the mother.

For whatever reason there is a general thinking that the mother is the primary caregiver of her children. So some responsible dads get the short end of the rope during custody proceedings.

I can speak from firsthand experience that Dads that choose to be responsible get shafted. 11 years perfect payment of child support and provided much more for my kids. I still received no respect from the agencies involved or the courts.

My sweet revenge was when the kids grew up and saw for themselves what had been happening. I didn't have to say a word. They all came to me and told me.

[Catherine]

I can speak from firsthand experience that Dads that choose to be responsible get shafted. 11 years perfect payment of child support and provided much more for my kids. I still received no respect from the agencies involved or the courts.

My sweet revenge was when the kids grew up and saw for themselves what had been happening. I didn't have to say a word. They all came to me and told me.

Isn't that the important part?

One family I know, the ex tried for years to turn the screws on dad in every way possible -- through the courts, financially, and by poisoning their daughter against him - as well as keeping the daughter physically away by every subterfuge known to mankind and a few designed specially for her by Hades. Looked for years like it was working, too -- then the daughter got out on her own (post-college), and saw what had *really* been going on with her own eyes (no longer through mom's filter). Dumped mom-the-bi+ch like a hot potato, apologized to dad for ever believing one word -- and ever since has had a fantastic relationship with dad, and coldly tolerates mom on very rare occasion only.

[Guest Taxed]

It is really a shame that some parents poison their own children against the other parent. They overlook the fact when the truth comes out your own kids will not trust you and resent you for the rest of your life!

Too many families have been ruined because of selfishness of one parent, just to settle a score against the other.

[Jack from Ohio]

The system still give the mother a free pass for almost everything, and fights the father at every turn. I have lived it. Facts and evidence do NOT make any difference.

[kcjenkins]

That's true, Jack. If the IRS employee chooses to ignore the proofs provided, there is really very little you can do, that would not cost more than what they lose.

[Jack from Ohio]

It is not only the IRS. All of society give the mother the pass, and beats up the father. I took verbal and social abuse from 95% of the people I knew. This went on till my son was about 22. He discovered, figured it out, and started announcing what he found and knew to the world. By then, my youngest was a sophomore in college (I was helping, their mother did not) so most of what I endured could not be changed or repaired.

However, the best part is that all three kids saw, discovered and now I have a wonderful relationship with all three.

I do NOT regret anything I spent to provide and take care of my kids. I am just a bit bitter that their mother did not help more than $1,000 toward college for all three kids.

[GeneInAlabama]

When my wife divorced her first husband, she did everything she could to keep a good relationship between her children and their father. She went way beyond what most women would. I am really proud of her.