EITC Preparer Compliance – Targeted, Tailored and Tiered
According to the latest IRS release, because of the multiple system abuse by taxpayers and tax preparers not doing their due diligence when it comes to EITC the following steps will be necessary to stop system wide abuse.
This is what they will do for 2012 tax season:
It’s
Targeted |
Our approach is to look at returns with a high likelihood of EITC error completed by the same preparer. |
Tailored |
We look for the cause of the errors. Is it not knowing the tax law; not applying it correctly, or, is it an intentional disregard of the tax law? |
Tiered |
Our goal is to reduce preparer errors by matching our response to the risk level of the same preparer continuing to have a high level of EITC error. Our responses range from reducing errors through education to barring return preparation through injunction. |
Why Have a Preparer Compliance Program?
We estimate 24 to 29 percent of all EITC claims have some type of mistake which costs the government $13 billion to $16 billion each year. Some errors are caused by misinterpreting the law; some are because the preparer accepted client-provided information at face value and others are out and out fraud. You, as part of the tax preparation community, are crucial in stemming these errors because paid preparers produce two thirds of EITC claims.
We know most of you in the paid preparer community practice due diligence and file accurate EITC claims. We developed this Preparer Compliance Program to ensure you compete on a level playing field.
Where do we Find Most EITC Errors?
About 60 percent of EITC errors fall into three key categories:
- Claiming a child who does not meet the age, relationship, joint return, or residency tests
- Filing as single or head of household when legally married,
- Over-or under-reporting income or business expenses to maximize the credit.
Click here for tips on avoiding these three key errors.
What are the EITC Return Preparer Compliance Treatments?
Preparers filing returns with questionable EITC claims may receive any of the treatments listed below: (Click on any topic listed below for more information on that subject):
- Reaching out to new and experienced preparers
- Visiting preparers filing highly questionable returns
- Auditing for due diligence compliance
- Barring Non-Compliant EITC Preparers from Filing Tax Returns
- Additional Forceful Actions Taken Against Return Preparers Committing EITC Fraud
Educational Opportunities for Avoiding EITC Error
Our first step is to reach out to preparers and provide education and other resources to help you avoid EITC errors and help you practice due diligence. This Return Preparer Toolkit has a wealth or resources:
- An online training course to help you refresh your EITC tax law and due diligence knowledge is available in English and Spanish. This course may qualify for continuing education for you. Click here for the Due Diligence Training Module.
- Our Schedule C and Record Reconstruction Training module helps you meet your due diligence requirements while preparing returns with self-employment income and provides tips for helping your clients reconstruct their business records.
- Our popular Due Diligence Videos help you avoid common EITC error situations and are fun to watch.
- Visit the Frequently Asked Questions part of this site. Your colleagues have asked IRS numerous questions related to EITC. Our answers will guide you to the right answer for similar situations.
- And more, follow the headings on the left navigation bar for more tips and tools to help you avoid EITC error.
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