Due Diligence - new rules

Technical topics regarding tax preparation.
#1
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Somebody asked a question yesterday on another board I belong to relative to the new due diligence rules for HOH, especially, but they also affect the CTC, EITC and AOTC. Discussing how others were going to change their practices or not, and whether the government is right in their attempts to make tax preparers the tax police created an interesting dialogue.

Someone made the comment that an RA told her that IRS has a new program called the Due Diligence Program, but I googled that and didn't find anything about such a program. I did find an interesting article reporting on the tax year 2016 and at the end of it there is a discussion of IRS identifying 41 tax preparers who had filed questionable returns as it related to due diligence and what the response had been. Of all the tax preparers in this country, if IRS could only find 41 worthy of commenting on, it sounds like a tempest in a teaspoon, not even a teapot and certainly not worth the effort of creating a whole program because of it. That part just seemed to be a fear tactic.

All in all my sense is that the issues of the government, due diligence and penalties have gotten out of hand and continue to put tax preparers more and more behind the Eight Ball for doing their jobs. Does Circular 230 offer some protection to us when it tells us we can rely on what we are told by a client?
 

#2
CathysTaxes  
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I believe that if a tax preparer has reasons to be suspicious, they must ask for more info
Cathy
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#3
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I agree, Cathy, that's always the responsibility of the tax preparer. These new rules introduced November 7 seem to go beyond that responsibility and require that quite a bit of documentation be collected by the tax preparer and stored with the tax return data. If such documentation is not in place the tax preparer can be assessed a penalty of over $500. That's what the fury is all about .
 

#4
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I like the Drake due diligence schedules. If you complete them, you've met the requirement. I charge about $100 extra to complete them if the "big 4" apply EIC AOTC ACTC HOH.
 

#5
JR1  
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100 bucks in TN???? Wow. Maybe I need to think about that!
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#6
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Don't forget to attach a Form 8867 to the return if it includes EITC, CTC, ACTC, ODC, AOTC, or HoH filing status for the 2018 tax year.

Failure is a preparer penalty per occurrence of $520 IIRC.

Won't be seeing any EITC, but I imagine many will see CTC, ACTC, and ODC after tax reform.

I agree with basisschedule. More work involved = higher fee.
 

#7
makbo  
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These new rules introduced November 7 seem to go beyond that responsibility and require that quite a bit of documentation be collected by the tax preparer and stored with the tax return data.

I keep on reading the term "rules" in this thread, but I believe all the paid preparer due diligence requirements on Form 8867 were laws passed by Congress and signed by presidents, weren't they? Oh, and also not yet successfully challenged in court (unlike the IRS attempted preparer regulation programs of the last 7-8 years). Why isn't anyone challenging these "rules" (laws) as unconstitutional, I wonder? Maybe if we had preparer registration and oversight, we wouldn't need as many due diligence laws?

"Does Circular 230 offer some protection to us when it tells us we can rely on what we are told by a client?"

Yes. You can find the specific section by searching, it mentions "rely in good faith".
 


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