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FORM 8867 GETS L.O.O.O.N.G.E.R


Lee B

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At this rate in a few years Form 8867 and the supporting worksheets will take more time and consume more paper than the actual tax return  -:(

Also the potential penalty for a single return is up to $ 2,080 !   I am going refuse to do several returns this year !

Copied from the Journal of Accountancy:

 

"The IRS expanded Form 8867, Paid Preparer’s Due Diligence Checklist, for 2018 individual income tax returns to include questions for both head-of-household filing status and the credit for other dependents. For 2017 tax returns this form needed to be included by the preparer on any Form 1040, U.S. Individual Income Tax Return, that claimed the earned income tax credit, the American opportunity tax credit, and/or the child tax credit.

Form 8867 consists of a series of questions verifying the paid preparer’s due diligence in requesting information from clients regarding a series of credits and deductions that have been subject to substantial tax fraud. This form transfers the burden of responsibility from the taxpayer to the paid preparer.

The new question for head-of-household status is, “Have you determined that the taxpayer was unmarried or considered unmarried on the last day of the tax year and provided more than half of the cost of keeping up a home for the year for a qualifying person?”

The other dependent credit is new for 2018. It provides a credit of up to $500 for dependents who are not qualifying children for purposes of the child tax credit. The due-diligence questions for the other tax credit are the same as for the child tax credit or the American opportunity tax credit.

The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, expands the penalties for failure to prepare the due-diligence checklist. Under prior law the penalty was imposed on each failure and could expose a practitioner to a potential $1,560 penalty on each return (see Rev. Proc. 2017-58). Under the TCJA, the penalty is increased to a maximum of $2,080 on a single tax return for returns and refund claims filed in 2018 ($2,120 for 2019).

Section VI of Form 8867 provides preparer requirements for attestation needed to sign the form. These include:

  • Interviewing the taxpayer, asking adequate questions, and documenting the taxpayer’s responses on the return or in their notes;
  • Completing Form 8867 truthfully and accurately;
  • Submitting Form 8867; and
  • Keeping the following five records for three years after the due date of the form:
    • Copy of Form 8867;
    • Worksheets used in completing the form;
    • Copies of any documents provided by the taxpayer used to prepare the form;
    • Records of how this information and the worksheets were obtained; and
    • Records of additional questions the preparer may have asked to determine eligibility to claim the credits and/or head-of-household filing status.

The retained records must be kept for three years from the latest of the following dates:

  • The due date of the tax return (not including extensions);
  • The date the return was filed (if the signing tax return preparer electronically filed the return);
  • The date the return was presented to the taxpayer for signature (if the signing tax return preparer did not electronically file the return);
  • The date the practitioner submitted to the signing tax return preparer the part of the return for which the practitioner was responsible (if the practitioner is a nonsigning tax return preparer).

Careful consideration and due diligence for these new requirements is essential, as the burden of responsibility is again shifted from the taxpayer to the paid prepare

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"This form transfers the burden of responsibility from the taxpayer to the paid preparer.''  That's the real problem.  While the IRS should certainly go after those preparers who make a business out of preparing bogus returns, there have always been laws to do that.  Shifting the responsibility, on every return, from the taxpayer to the preparer, is IMHO not only morally wrong but also totally counter-productive.  Preparers are not and should not be unpaid IRS employees.  Yes, you have to be alert to the occasional bogus TP, but this "solution" is just plain wrong.  

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Remember when the IRS used to treat us as stakeholders?  They couldn't praise us enough for helping them do their job.  It changed when Karen Hawkins became head of the Office of Professional Responsibility.  To quote her in an Oct 2015 interview with the American Bar Assoc, " I believed (then and now) that the real harm being done to taxpayers and the tax system involved violations of the various due diligence provisions in Circular 230 which occur in epidemic proportions." Every presentation she gave that I witnessed was more like a scolding than a learning experience.  I remember once when she went on and on about basis of securities, assuming that we all just make them up.  In reality, every preparer in the room likely spent half of their tax season trying to determine a reasonable basis.  I was so thankful when she left, but it turns out that her legacy didn't.  WE are the bad guys.

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57 minutes ago, SaraEA said:

I was so thankful when she left, but it turns out that her legacy didn't.

I've noticed the exact same thing - and the canned presentations given to IRS people when they come to speak all sound the same.  Tax preparers are the source of evil and fraud and have to be watched like hawks and given obscenely long checklists and threatened with fines for not filling them out.  Heard of one preparer last year fined for not filling out the 8867 properly for a baby the neighbor had!  It used to be we could say "personal knowledge" and it would be accepted.  Yeah, when the multi-year client comes in with her belly round one year, we get the email later saying "it's a girl!" with a picture,  and the next year she comes with the baby girl asleep in the carrier, I think it's a fair assumption that it's her kid!  Five pages of checklists is STUPID when I know the family - and means NOTHING if I'm a crook.  Crooks have no compunction against lying on the bleeping checklists!  Grrrr; don't get me started.

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