Tax Help Letter From the IRS: How to Avoid Tax Mistakes and IRS Penalties on 2010 Tax Returns

Some taxpayers can expect to get a visit or a courtesy letter from the IRS this tax season–but not necessarily because they are being audited. This time around, the IRS wants to reach out to taxpayers in order to give them tax help advice on how to avoid tax problems.

These letters and IRS personal visits are targeted to educate taxpayers on the tax filing rules and also potential IRS penalties. A recent report shows that the IRS plans to play an active role in helping taxpayers avoid tax filing errors that would incur IRS penalties later on.

CCH (http://intelliconnect.cch.com) reports:

IRS Sends Filing Season Cautionary Letters to Preparers; Plans In-Person Visits

Approximately 10,000 practitioners will receive letters from the IRS in coming days and weeks reminding them of common filing season mistakes. The IRS also announced that revenue agents will begin making in-person visits to selected preparers in late January. The letters and visits are part of the Service’s enhanced oversight of preparers during the 2010 filing season.

Letters

Practitioners receiving the letters are among those with large volumes of specific returns where the IRS frequently sees errors, the Service explained. The letters highlight four areas of frequent errors: (1) Schedule A; (2) Schedule C; (3) the Earned Income Tax Credit (EITC); and (4) the First-Time Homebuyer Credit.

“As a return preparer, you must take all necessary steps to file accurate federal income tax returns on behalf of your clients,” the IRS reminded practitioners. The Service noted that these steps include reviewing applicable tax law to ensure that all income has been reported on the return and that only credits, expenses and deductions allowed under the tax code are claimed.

“If the preparer fails to report income or takes inappropriate deductions, the tax liability later determined by IRS will be assessed with interest, possibly penalties, and the individual will be the one to who the IRS’s collection arm reaches out,” Claudia Hill, EA, editor-in-chief of CCH’s Journal of Tax Practice and Procedure observed.

Penalties

The letter also states that assessment of return-related penalties against a preparer may result in, among other things, disciplinary action by the IRS Office of Professional Responsibility (OPR). IRS officials have indicated in the past that a referral by revenue agents to the OPR will not be automatic when the Service assesses a penalty under Code Sec. 6694(a) against a preparer who is also a practitioner within the meaning of Circular 230. An IRS spokesperson told CCH that the letters do not reflect a change by the Service in this approach.

The IRS intends to follow up the letters with in-person visits by revenue agents to an undisclosed number of preparers. In frequently asked questions (FAQs), the IRS reported that “thousands” of preparers will be visited by revenue agents. During the visits, which are expected to last three hours, revenue agents will review common errors and discuss the obligations and responsibilities of practitioners to prepare accurate returns, the Service explained.

Revenue agents will not assess return preparer penalties during the visits, the IRS reported. The visits are “not a compliance audit.”

By George L. Yaksick, Jr., CCH News Staff

If you’re one of the taxpayers who get a letter or a personal visit from the IRS, it is advisable to take their tax filing advice seriously in order to avoid IRS problems further down the line. It would be less excusable for a taxpayer to seek a penalty abatement due to a tax filing error that the IRS personally cautioned against!

Tax Resolution Services is a team of tax attorneys, CPAs, and Certified Tax Resolution Specialists who are here to help you with your IRS problems. Call our office today at 1-866-477-7762 for a free tax resolution consultation or visit www.taxresolution.com

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