Tax Debt Help – Standard of Conduct for Tax Return Preparers
TAx preparers beware the IRS means business on how you prepare returns and conduct your operations. This is a must read news article from the IRS.
Treasury, IRS Implement Enhanced Standards of Conduct for Tax Return Preparers; Plan Overhaul of Tax Return Preparer Regulatory Regime
WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2008-13 that implements a May 2007 law that expanded the tax return preparer penalty and heightened the standards of conduct that must be met by tax return preparers in order to avoid that penalty.
Notice 2008-13 also solicits input from the tax return preparer community on a planned overhaul of the tax return preparer penalty regime anticipated to be completed by the end of 2008.
“The plan to take a fresh look at the preparer penalty regulations will be a top priority for us in 2008,” said IRS Chief Counsel Don Korb. “We look forward to receiving comments from all interested parties on their recommendations for the final regulations. Our goal is to complete our work on the overhaul of these rules by the end of 2008,” he said.
For undisclosed positions on a tax return, the new law replaced the realistic possibility standard with a requirement that there be a reasonable belief that the tax treatment of the position would more likely than not be sustained on its merits. In cases in which the taxpayer discloses the position on the tax return, the notice implements the new law that states there must be a reasonable basis for the tax treatment of the position taken on the tax return.
The notice provides interim rules to implement and interpret these heightened standards. The interim rules will be in effect until the overhaul of the current return preparer penalty regulations is complete. The interim rules emphasize the importance to preparers of understanding the legal basis for positions taken on tax returns, the requirement for taxpayers to disclose certain positions, and the need for preparers to advise taxpayers on the various penalties that can apply when a position is taken on a return that may not be supported by existing law.
Under the notice, preparers generally can continue to rely on taxpayer representations in preparing returns and can also generally rely on representations of third parties, unless the preparer has reason to know they are wrong.
The new law also expanded the return preparer penalty to cover all tax return preparers, not just income tax return preparers. Under the notice, preparers of many information returns, however, will not be subject to the new penalty provision unless they willfully understate tax or act in reckless or intentional disregard of the law. The notice also includes examples illustrating how the new standards would apply.
In addition to Notice 2008-13, additional guidance has been provided in Notice 2008-12 with respect to the implementation of the tax return preparer signature requirement, and in Notice 2008-11, which clarifies the transition relief provided in Notice 2007-54, issued earlier this year.
S. Raines, Sr. Financial Advisor/Tax Preparer
Tax Debt Help – “Be Prepared for the Preparers!”
With the recent news that overall nationwide tax preparation fees will increase by 30% for the 2007 filing season, It’s time to get folks to remember their Boy and Girl Scout days and “Be Prepared” to get the best bang for your bucks.
I’ve often wondered what percentage of taxpayers would prefer going to an incompetent tax preparer if it meant that they would file an incorrect return and taking the risk of betting with Uncle Sam. While reading several articles on the IRS website recently on the Return Preparer Fraud program, there was some very valuable information that I want to pass along. This is an excerpt from those articles:
“Return Preparer Fraud generally involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. Preparers may also manipulate income figures to obtain fraudulent tax credits, such as the Earned Income Tax Credit.In some situations, the client (taxpayer) may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on their tax returns. However, when the IRS detects the false return, the taxpayer must pay the additional taxes and interest and may be subject to penalties and criminal prosecution.While most preparers provide excellent service to their clients, the IRS urges taxpayers to be very careful when choosing a tax preparer. You should be as careful as you would in choosing a doctor or a lawyer. It is important to know that even if someone else prepares your return, you are ultimately responsible for all the information on the tax return.”
If you are a “joint jumper” and run from one tax professional to another to get the result you want, just remember, you can go to ten different tax professionals and get a different answer for any one question. There are volumes and volumes of tax code and laws, no one professional knows the answer to every question. A good professional should be upfront and let you know that they don’t know the answer, but they’ll find it. That’s true professionalism, someone worth trusting and someone worth sticking with.
Here are my tips for Choosing a Return Preparer:
- Avoid “I can get you more” tax preparers
- Avoid preparers who base their fee on a percentage of the amount of your refund.
- Find out the person’s credentials. Ask if they take continuing education classes each year for tax updates. If they can’t look you in the eye and say yes, then that’s your cue to say no!
- Never use a tax professional who will not sign your tax return or who doesn’t provide you with a copy for your records.
- Make sure that your preparer can be contacted during the year to answer any questions you may have after the return has been filed.
- Review your return before you sign it and ask questions on entries you don’t understand.
- Never sign a blank tax form.
- Find out if the preparer is affiliated with a professional organization that holds them to a code of ethics.
- Ask questions, there are no stupid questions when it comes to your financial future.
On the other hand if you do find that preparer who finds you that refund be prepared for the wrath of the IRS. You might make it through the first, second and third year without a word. But suddenly one day that letter comes in the mail. After opening the letter, you find that you are being audited and the scrambling begins for receipts, which by the way, you don’t have. Now think about this, after the audit and the adjustments, you’re facing three years of additional liability and accrued interest.
Tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine. If you don’t believe me, check out the criminal investigation statistics from the IRS themselves.
| FY 2002 | FY 2003 | FY 2004 | Investigations Initiated | 254 | 229 | 206 |
| Prosecution Recommendations | 89 | 169 | 167 |
| Indictments/Information | 61 | 109 | 121 |
| Convictions | 64 | 67 | 117 |
| Incarceration Rate* | 86.8% | 83.7% | 84.4% |
| Avg. Months to Serve | 23 | 19 | 19 |
*Incarceration may include prison time, home confinement, electronic monitoring, or a combination.
As a year round tax preparer, I find myself amending returns that have been prepared by every profession whether it be an accountant, CPA, independent firms and of course, the self-preparers. And as the years pass, I realize that there is no one sector of tax professionals who shouldn’t be questioned on their credentials or education. Working with clients who have received that audit letter and find themselves in major “tax debt” trouble, I understand the overwhelming need for “tax debt help” to avoid an “IRS Levy”. They find themselves in a situation of having to hire the services of Tax Resolution firms such as Effectur, Inc.
The final result of being “prepared” can be paying four to five times the amount you would have paid had the returns been completed correctly. Seems to me the only one who is truly prepared is Uncle Sam as he “prepares” to take your money.
Sharon R. Raines, Sr. Financial Advisor/Tax Preparer
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