The IRS is seeking to improve paid tax preparer training for the Earned Income Tax Credit (EITC). To pursue this goal, the IRS has expanded the EITC compliance program.
One of the measures undertaken by the IRS is targeting returns of any federally authorized tax professional with a consistent record of EITC errors. The objective is identification of the cause for errors. Possible reasons for inaccurate EITC claims are lack of knowledge about qualifications for the credit or intentional disregard for accuracy.
In order to reduce EITC problems, the IRS will identify whether mistakes continue for tax return preparers with previously high error rates. Potential IRS responses range from mandating extra tax preparation education to barring a tax practitioner from the industry.
Any individual working in registered tax return preparer employment with EITC claims will encounter IRS scrutiny. Both new and experienced tax professionals with questionable EITC claims can expect contact from the IRS, either in writing or with personal visits. In some cases, a tax preparer professional may undergo an IRS audit of EITC due diligence compliance.
To avoid EITC errors, a formal registered tax return preparer study course is essential because it thoroughly covers all aspects of tax preparation. In addition, the IRS offers online tax training specifically addressing EITC tax rules.
The Return Preparer Toolkit section of the IRS website describes common EITC errors in order for tax preparers to improve due diligence procedures. Many specific situations are covered in the Frequently Asked Questions section.
More education about the EITC is available from online tax school courses. Every tax practitioner benefits from this refresh of information. These courses also count toward hours needed for RTRP continuing education requirements.
The IRS estimates that between 24 and 29 percent of all EITC claims have errors costing the government approximately $13 billion to $16 billion each year. Although some mistakes are caused by inaccurate interpretation of the law, most errors are believed to originate because tax return preparers accepted fraudulent information from taxpayers or made incorrect assumptions.
According to IRS evaluations, about 60 percent of EITC errors fall into these three categories, which now demand extra attention from every tax practitioner: (1) incorrectly claiming a qualifying child, (2) married individuals filing as single or head of household, and (3) maximizing the credit with inaccurate reporting of business income or expenses.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
- Update on Tax Return Preparation Matters Getting Maximum IRS Scrutiny
- IRS Tax Preparation Standards Apply to Deduction of Business Expenses
- Tax CPE Delivers Frequently Needed Details About IRA Withdrawals
- Initial Step on EA Worksheets is Assurance of Taxpayer Honesty About Marital Status
- Increasing Responsibility of Internal Auditors Provides New Opportunities for Accountants Who Take CPA Exam Preparation Seriously