EA Review Part 3

Preparer Penalties

$50 penalty for failure to: furnish a copy of return or calim to taxpayer sign a return provide PTIN on return retain a copy for record file a correct info return $500 penalty fail to comply with EIC diligence requirements endorse, cash, or deposit taxpayers refund check

Penalties for Incorrect EIC Returns

$500 for each failure, no max if disallowed part or all of EIC -pay back error amt with interest -may need to file 8863 info EIC after disallowance -can not claim 2 years if reckless or intentional disregards of rules 10 years if fraud

(UNIT 10) IRS Examination Process

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(UNIT 4) Diligence as to Accuracy 10.22

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(UNIT 5)

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(UNIT 6) EIC

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(UNIT 7) Obligations, Fraud, & Penalties

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(UNIT 8) Preparer Misconduct & Sanctions

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(UNIT 9) Payments and IRS collection

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Collection Appeals Program (CAP)

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Collection Due Process Hearing (CDP)

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IRS Action to Collect Unpaid Taxes

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Notice of IRS Contact to Third Parties

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Other Court Appeals

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Recovering Court Costs

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Taxpayer Examination Rights

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Taxpayer's Representative

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Preparer Compliance Requirements

1) Complete and Submit EIC Checklist - Form 8867 Paid preparer's EIC checklist 2) Compute the credit 3) Retain Records 4) Knowledge

Collection Appeal Rights

Collection due process - a notice will be delivered a taxpayer has 30 days to request a CDP hearing. If don't like determination letter can appeal to US tax court within time specified in Appeal's determination letter Collection appeals program - quicker but can't go to court if disagrees with CAP

Best Practices 10.33

Communicate clearly with client establish fact and make conclusions by fact and law advice client on conclusion reached act fairly and with integrity before IRS

Other Duties and Prohibited Acts

Delay is prohibited no employee of disbarred or suspended status can't hire a gov worked involved in a case previously can't do a notary if you have material interest in a matter can't list your bank acct on form 8888 to get paid by pulling part of refund.

U.S. Tax courts

EA and CPA to represent must pass Tax Court exam. Licensed Attorneys exempt from exam

Seeking Relief from Joint Liability

Innocent Spouse Relief - did not know and unfair for IRS to hold this person liable Separation of Liability Relief - must be not married or living apart for last 12 months Equitable Relief - abuse by spouse, poor mental or physical health

Abatement of Penalties and Interest

disaster area IRS mistake

Penalties on Taxpayers

failure to file - 5% of unpaid taxes each month (may not exceed 25% of unpaid taxes) failure to pay - 0.5% of unpaid taxes each month

supporting documents

financial documents - canceled checks, bank statements, Legal documetns - birth certificates Business entity supporting documents Expense records

Privacy of Taxpayer Info 7216

fine $1,000 and 1 year jail or both (knowing or reckless) code 6713 $250 penalty and not required to be (knowing or reckless) to disclose info written permission in usually good for 1 yr

OPR Complaint Process

hard letter received by mail 30 days to respond

IRS Collection Process

has 10 yrs from date of assessment to collect

CE Waiver

health issues extended active military duty absence from US for long period of time case by case

Knowledge of Client's Omission 10.21

if practitioner knows: advice client of noncompliance and consequences.

Taxpayer Advocate Service (TAS)

independent organization within IRS to help taxpayers free and confidential for business and individuals Form 911

Notice to Levy

is legal seizure...confiscating property. IRS will wait 30 days from notice before acting, if collection is in jeopardy immediately seize can begun without waiting

Renewal of Enrollement

last SS number 0,1,2,3 April 1, 2016 4,5,6 April 1, 2014 7,8,9 April 1, 2015 renewal submitted Nov 1 - Jan 31 prior to EXPIRES MARCH 31 must notify RPO of address change within 60 days

Record Retention

latter of 3 yrs from due date or filing date omitted above 25% of gross income - 6 yrs from filing date claim for credit or amended return latter of 3 yrs from filing or 2 yrs from date tax paid claim loss from worthless securities - 7 years payroll and employment records - 4 years fixed assets, real estate - until tax yr when disposed fraud and no return filed - NO limit

Tax Shelters

listed transaction must be reported on form 8886 (tax shelter) IF reportable transaction is not disclosed additional penalty of 30% of the understatement may be assessed

Repeat Examinations

may request IRS to discontinue examination if audited in either of last 2 yrs and no change was proposed

Audit Location

may request to transfer to location where the taxpayer's records are located

Federal Tax Lien

must own $10,000 before Notice of Tax Lien is issued. It means IRS before a creditor Notice of Lien may request hearing (CDP) with office of appeals Whenever the IRS records a Notice of Federal Tax Lien, they will provide the taxpayer with notification by certified mail. When the taxpayer receives the notification, he may request a Collections Due Process (CDP) hearing with the IRS Office of Appeals by sending a request for a hearing to the address shown on the notice. The taxpayer must file his request by the date shown on the notice.

(UNIT 11) The Appeals Process

must pay tax first before going to Court of Federal Claims or US district court

How Returns are Selected for Examination

notify taxpayer never by E-mail returns selected for examination -potential abusive/tax avoidance -computer DIF score -Info Matching -Related examination -Third party information

Refund Anticipation Loans (RAL)

obtain taxpayer to disclose info to lending institution advise taxpayer of all fees adhere to adverting standards

Prohibited Actions during Suspension or Disbarment

only can represent himself appear as trustee, guardian, appear as witness

Delay Tactics

penalty $25,000

Accuracy Related Penalties

penalty 20% of understatement of tax penalty 40% if overstatement is 200% or more understatement because of Fraud - 75% of underpayment amt Frivolous Return Filed - penalty $5,000 ($10,000 for MFJ) Altering a Jurat - penalty $500 Failed to provide SSN - $50 for each failure

Tax Positions

practitioner may sign return if at least one is met -position is more likely the not (greater than 50%) -position has a reasonable basis

Tax Return Preparers

prepare returns for compensation

IRS information requests 10.20

provide to IRS promptly if have information reasonable inquiry. try to call client not required to inquiry third party or independently verify info from client for IRS request legally privileged info. a preparer my choose to decline (not provide to IRS)

Return of Clients Records 10.28

required to return original records of client even if not paid especially to comply with federal tax obligations not required to even show work completed by paid preparer may keep copies of all info

Limited Practice Due to "special relationship"

self-representation, immediate family member, bona fide officer, general partner (not limited), full time employee, fiduciary, Authorization for special appearances

Form 8821

tax info Authorization (TIA) must be received by IRS within 120 days taxpayer signs form used by banks, employers, prepares, The filing of a new Form 8821 automatically revokes all prior authorizations for the same tax matters and years listed therein. If a taxpayer does not want to revoke a prior tax information authorization, he must attach a copy of any authorizations he wants to remain in effect. CAN'T BE USED TO REQUEST A COPY OF TAX RETURN

Audit Reconsideration

taxpayer may request reconsidaration

Conflict of Interest 10.29

to represent need to have written conflict waivers or consent which describes the conflict from both clients keep 36 months from date representation ends

Client Fraud

understatement of income overstatement of expenses all cash business

Durable Power of Attorney

until death

Complaints against Prepares

using form 14157 and anonymous complaints are allowed if preparer is reporting another preparer must have client consent

Preparer Midconduct

when representing taxpayer related to practitioner's own return giving false opinion knowingly or gross incompetence any misconduct, felony

Treasure Regulations

1. Legislative Regulations 2. Interpretive Regulations 3. Procedural Regulatons Proposed / Temporary / Final

Trust Fund Recovery

100% of amt of unpaid taxes

CE

16 hours each year with 2 hrs of ethics (72 hrs in 3 year cycle) 50 min is an hour 1 hour of teaching or discussion and 2 hrs for prep (max 6 hrs annually)

PTIN

18 yrs old or up renew each year (Oct 16 - Dec 31) fail to list valid PTIN on tax return $50 penalty per return $25,000 a year. Need PTIN even for non 1040 series prepares

Federal Tax Court Small Tax Case Procedure

decision can not be appealed by taxpayer or IRS dollar limit $50,000 max for any year

Appealing after Examination

30 day letter if disagree with letter may do Small Case Request - $25,000 for each tax period includes tax, penalty and interest can send in a short memo Filing a Formal Protest - exceeds $25,000 a detailed letter with signature under penalties of perjury OR 90 day letter - Notice of Deficiency. Taxpayer has 90 days FROM DATE IRS MAILS IT, 150 if address in outside of US to file a petition to US Tax Court

internal revenue Manual

35 separate parts and only 22 available to public

Inactive/Termination

60 days to respond to notice of termination/inactive

Audit Determinations

No Change - return okay Agreed - IRS propose changes and taxpayer agrees Disageed - IRS propose changes taxpayer understands but disagrees

(UNIT 2) Practitioners

Attorneys, CPA, EA, Enrolled Actuaries, Enrolled Retirement Plan Agents (ERPA)

Tax avoidance vs tax Evasion

Avoidance - legal reduction of taxable income Evasion - illegal practice of intentionally avoiding paying taxes If you don't file a tax return - $25,000 and one year prison

Covered Opinions

COVERED OPINION - written advice to fed tax issue IRS has determined is a TAX-AVOIDANCE transaction. RELIANCE OPINION - more likely than not (greater than 50%) to result in federal tax issue being sustained in the taxpayer's favor MARKETED OPINION - used by other than practitioner in promoting, marketing, or recommending an investment plan to one or more taxpayers.

Tax Payment Options

Form 1127 Extension of Time for Payment "Undue Hardship" generally extension not granted for more than 6 months Installment Agreement - A taxpayer who receives a Notice of Termination of an Installment Agreement must utilize the Collections Appeal Process (CAP). IRS offer in compromise program -

(UNIT 3) Power of Attorney

Form 2848 with specific description (years and matter) every taxpayer needs one (if joint both need to have a form) until revoke or withdraw New POA replace old, unless specified Can REVOKE or WITHDRAW write across first page on form sign and date (fax or mail in)

Third Party Authorization

Gives permission to discuss tax info with third party Can not receive a tax refund check expires on due date of next tax return need to know 5 digit PIN

U.S. Supreme Court

IRS is obligated to follow the desicon with tax and other courts IRS has a choice to follow or not

Freedom of Infomation Act (FOIA)

IRS need to provide information to taxpayer upon request. If info can harm national security, FBI, criminal records, and so on they can deny info. They have 20 days to give decision.

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If you have employees, reliance on others, presume employer did due diligence that he will produce good work. SIGNATURES prepare signature and PTIN before presented to taxpayer for signature. tax payer signature primary tax-preparer only sings return. no info needed from others who worked on return. EIN also provide

Practitioner Fees 10.27

NO unconscionable fees NO contingent fees exception: filed amendment return120 or letter from IRS penalty or interest judicial process

IRS Publications, Forms, Instucitons

Not considered to have substantial authority

Substantial Portion Rule

Not if Less than $2,000 or Less than 20% of adjusted gross income (AGI)

Representative Sign Return in Lieu of Taxpayer

POA if both are true: -permitted under IRC -taxpayer specifically grants permission in POA IRC Internal Revenue Code allow if: disease or injury out of US or Puerto Rico 60 days prior to return due date case by case with permission

(UNIT 1) Legislative Branch

Primary Function of originating tax laws. Executive and Judicial are also involved. Judicial can rule freely.

Advertising Restrictions 10.30

Prohibited to use IRS and treasury logo no false or deceptive, coercive info can use only: enrolled to represent taxpayers before the IRS enrolled to practice before IRS admitted to practice before the IRS Mail Advertising: 36 months letter and to whom mailed Radio: keep recorded broadcast for 36 months may list fees and required to keep them for 30 days after published

Unenrolled Tax Return Prepares

Registered Tax Return Prepares (designation struck down) Can only represent clients whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.

Disciplinary Sanctions

Reprimand - least severe, private letter Censure - public reprimand name published in Internal Revenue Bulletin Monetary Penalty - penalty to pay Suspension from Practice before IRS - up to 59 months Disbarment from Practice before IRS - min 5 yrs. PTIN revoked and matter published in Internal Rev Bulletin

Advising Client of Potential Penalties

Required to advice if: practitioner advised the client with respect to the position practitioner prepared or signed the tax return if disclosure required use form 8275 or 8275-R to avoid accuracy-related penalties. NOT used to avoid penalties

Copies of Tax Returns 6107

Required to provide a hard copy of tax return at time of taxpayer's signature Keep copy of return or min of taxpayer's name, id#, tax year,and type of return. need to keep for 3 years after close of return period (close is June 30) so record retain begins July 1.

Identity Theft

Stolen Identity Refund Fraud (SIRF) IP PIN for efile check photo ID and be careful

Partnership (TEFRA)

Tax Equity and Fiscal Responsibility Act will audit partnership as single entity and tax matters partner serves as main contact exception for 10 or less partners but they may elect to be under TEFRA

Substantial Authority

Treasure Regulations Revenue Rulings - can be used to avoid certain IRS penalties Revenue Procedures Private letter rulings - applies to this taxpayer only Technical Advance Memorandum - on closed transactions to specific case IRS notices or press releases Proposed Regulations Congressional intern as reflected in committee reports

Not considered practice before IRS

U.S. Tax Court, appearing as witness or translator

Tax Preparer Fraud

Understatement due to unreasonable position - greater of $1000 per return or 50% of preparer income Understatement due to negligent or willful disregard - greater of $5000 per return or 50% of preparer income

EA

apply for licence within one year after passed the exam or work for 5 years for IRS and apply within 3 years for left the IRS If denied may file appeal within 30 days to Secretary of the Treasury.

Injured Spouse Claims

apply in refund was applied against past due amounts own by his spouse

Examination Procedures

at end of examination agent issues a Revenue Agent Reports (RAR) taxpayer my agree and sign or disagree if agree must pay amt due in 10 business day (has 21 day if amt is less than $100,000) to avoid additional penalty or interest

Electronic Federal Tax Payment System (EFTPS)

business can schedule payments 120 days in advance individuals can schedule payments 365 days in advance

Return Preparer Office

can deny application for EA if so, have 30 days of notice to do a written appeal to Office of Professional Responsibility

Tax Refunds

can use refund to purchase up to $5,000 US series Savings Bond can't deposit to credit cards can't deposit to financial institutions outside US prepare need to verify routing and acct # with taxpayer each year

Common EIC Errors

claiming the child who don't meet age, relationship, residency test

Taxpayer's Ability to Pay

collection of Financial Statements and Collection Information Statements Form 433 A, B, F Currently Not Collectible: status granted for at least 1 yr

Centralized Authorization File (CAF)

computer database for all filed power of attorney or tax info Authorization Form 2848 and Form 8821 assigns every tax practitioner a # IRS can send notices and communications to the representative Third Party Designee (Checkbox) Authorization is not recorded on the CAF

Form 4506 and 4506-T

current and past 6 years 4506 request for Copy of Tax Return 4506-T request for Transcript of Tax Return account transcript record of account - has most info (current yr and only 3 prior years)