Health & Fitness
Some things you should know if you have someone else prepare your income taxes
The IRS is implementing oversight control within the tax preparation industry. Will you be affected?
The IRS has been making changes to implement tighter preparer oversight. All paid tax preparers must obtain a PTIN (Preparer Tax Identification Number). The preparer must take a competency test prior to December 31st, 2013 and also take 15 hours of continuing education each year. Exceptions to the competency exam are CPAs, attorneys and Enrolled Agents (an IRS designation). The only other exceptions to the requirement are non-paid and supervised preparers. The test is a 2 1/2 hour timed exam with 120 questions. The testing process is just now ready to start and the initial individuals that take it will not see their scores for 2-6 weeks so the IRS can validate the test and determine the pass/fail cutoff. It remains to be seen whether this will cause a significant number of preparers to stop preparing to avoid the extra hassle. I personally feel that if this is done properly we will all benefit and I don't have any issue with the concept.
In November the IRS sent 21,000 preparers letters to remind them of the duty to prepare accurate returns on behalf of their clients. The group of preparers were identified by the fact the prepare large volumes of Schedule A, C and E and also high percentage of attributes associated with returns typically containing inaccuracies and misinterpretations of tax law. During 2012 the IRS will visit about 10% of these preparers and remind them of their obligation. This is the 3rd year the IRS has taken this hands on approach to improving return accuracy. The IRS is also implementing tighter control of the Earned Income Tax Credit compliance process due to the fact this credit has been identified as a source of inaccurate tax positions.
The IRS has recently posted a new form (Form 14242 , “Report Suspected Abusive Tax Promotions or Preparers”) to be voluntarily by taxpayers to report a tax avoidance scheme or tax return preparers who promote such schemes. The form asks the respondent for specifics about the scheme and any promotional materials that may be available. The form states that providing the requested information is voluntary, and that failing to provide all or part of the information won't affect the respondent, but providing false or fraudulent information could lead to penalties.
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These are just a few interesting facts that I felt you may not have heard about, but are potentially valuable as you look toward the upcoming filing season. If you have any questions related to anything covered here feel free to contact me or this information is also available on the IRS website with more detail.