IRS CONTACTING EITC RETURN PREPARERS

[Edward]

a. So says a Quick Alert of 19 Oct. My EITC interviews/records now include obtaining copies of SSAN cards, and if no SSAN cards, nor prior year returns, then I ask for birth certificates. Have always wondered why SSA dosen't include DOB on the cards? Anybody know why?

b. I reproduce IRS PUB 3524 (in color) with clients names/SSAN at top of Pub, and after they read and check off the answers, they sign at bottom of second page certifying that they DO QUALIFY for the EITC, and that if any inaccurate data is provided, they could face criminal charges by the IRS. I believe the IRS PUB is more effective in drawing their attention, especially the color, charts on page 2 and the requirement for them to sign.

c. I also use PPC's 1040 Checklist C101 "Due Diligence Review" for EITC qualification and recording of important questions/responses.

d. I don't see it suggested, but if we have any doubt about a particular clients eligibility, could we ask for school/medical records to verify where children are living? Foster children, and those taxpayers (with their children) living with relatives are a problem. Note that the QA didn't make any reference to the millions of self-filers!!!

Any comments

Edward

[TAXBILLY]

Hope you have good liability insurance if you delve into d.

taxbilly

[jainen]

>>if we have any doubt about a particular clients eligibility<<

You seem to doubt EVERYONE's eligibility. I suppose if you are running an EITC mill like some franchise offices you might want to standardize some rigorous procedures because their reputation attracts opportunists. Of course, true doubts that are based on conflicting or incomplete information must be resolved, but in the typical small practice ordinary interview techniques should serve well enough.

I don't see how school or medical records would help at all. Everyone lies about those even more than about taxes.

[bstaxes]

I guess living in a small rural town where everybody pretty much knows everyone, I don't have problems with EITC. The majority of my clients have been with me for more than 15 years. Some of the clients even bring their children with them.

Thanks for the heads up on this and I will be careful with new clients.

[kcjenkins]

Edward, I think D definitely does go too far. Even B seems a bit extreme, unless you have a large turnover and lots of new clients each year. Or do you do that to all clients, every year?

[MAMalody]

I take a relatively modest approach. I simply have those with EITC sign date the bottom of the 8867 that the information on that form is correct. I keep it light but accurate and have them return it with the 8879 and the state e-file form. I have never had a negative vibe nor have I had anyone ever indicate any of the info is wrong. With new clients I have them give me a copy of their SSN card. ( Keep all this in the context that my practice is all internet based, I never see any clients and I did returns in 25 states and for people in three countries.)

[TAXBILLY]

The rules we are to follow:

http://www.irs.gov/individuals/article/0,,id=179024,00.html

taxbilly

[jainen]

>>The rules<<

These rules are for the PREPARER, and can not be met by having the client sign the form. According to this article, 90% of EITC errors are due to the preparer's lack of knowledge of the law, and in my opinion asking the client to sign the form is another example of that problem.

The clients do not have to understand the law. That's our job. They don't have to understand our questions or their own answers, so their signature means nothing. the PREPARER has to determine if the client's answers are consistent and complete.

[mlinder42]

I disagree with last post we have been audited twice do to the large amount of EIC returns and our proximity to DC.Both times we came out fine due to us having a signed 8867 for every client plus copies of SS cards for taxpayer and dependents on returns they checked.We also have copies of ID for all taxpayers.

[MAMalody]

I believe the following would be a better guideline for due diligence.

www.irs.gov/individuals/article/0,,id=150531,00.html

[Edward]

Reference my Post #1:

Item a: I always get copies of SSAN cards and bring the data forward each year & add any new additions.

Item b: This was being done to provide an orientation on just how the program works and I've received feed-back that many of the items covered "were fairly new to them of which they were totally unfamiliar with". The client personally completes the form and I explain to them as needed. I WOULD THINK THIS TO BE VITAL DATA FOR THEM ESPECIALLY if they should happen to Self-File their returns - of which alot are doing. This is done on a FIRST TIME BASIS and is not repeated.

Item d: This is definitely not planned. Just a passing thought after reading about all the fraud going on.

I've always given special attention to the EITC because of the 10-12 billion dollar fraud loss for 2006 PLUS the losses since the program began; and more coming up with the expanded EITC under the ARRA of 2009. An interesting quote from the Taxpayer Advocate Report to Congress regarding IRS PROBLEMS ADMINISTERING REFUNDABLE CREDITS:

According to Nina Olson the IRS will need to balance fraud prevention with the timely delivery of refunds. Refundable credits require the IRS to perform a delicate balancing act. On the one hand, if the IRS does not do enough to detect and prevent fraud, it may pay out billions of dollars as a result of false and fraudulent claims. On the other hand she states, if the IRS CLAMPS down too tightly, hundreds of thousands and potentially millioins of predominantly low income taxpayers will not receive timely refunds". Interesting!! Guess I better get back to the basics.

Thanks for all the input.

[mlinder42]

The same way that IRS must weigh doing timely refunds versus fraud prevention, in our practice we must weigh the time we take doing due diligence against the time our clients will sit and wait for us to do their return. In our shopping center there is a JH and another independent and an HRB across the street. We can only let the line become so long during peak.

[jainen]

>>We can only let the line become so long during peak. <<

Maybe after a third preparer audit you might get the point.

[mlinder42]

They can audit all the want we have come out with no problems from the audits with them finding our due diligence is above what we have to do.When you do over 3000 EIC returns you will have clients that lie to you even when you ask all the questions.One third of our clients are new each year our volumn has doubled in 3 years.