Tuesday, December 23, 2014

IRS Warns Tax Return Preparers About Schedule C Errors

Ken Berry for CPA Practice Advisor writes: According to a new report in the Kiplinger Tax Letter, the IRS has mailed out more than 2,500 letters this month to tax return preparers who have been guilty of foiling a faulty Schedule C, Profit or Loss from Business (Sole Proprietorship). The gist of the message: Do better next time.
However, while the IRS appears to treating wayward practitioners with kid gloves for the time being, don’t expect examiners to be as lenient during the 2015 tax-filing season. Repeat offenders could be slapped with penalties for as much as $5,000 per return.
This isn’t the first time the IRS has addressed this issue. After sending out tens of thousands of such letters in the past, the IRS updated its posting of Letter 5105 on November 24, 2014. In the letter, Carolyn Campbell, Director of the Return Preparer Office, outlines the reason for the correspondence. It says that the IRS has reviewed tax returns the recipient prepared in the past year and discovered many have a high percentage of traits typically resulting in errors on Schedule C. The letter reminds tax professionals of their responsibilities and stresses the need for continued educational assistance.
Specifically, Letter 5105 covers the following:

Due diligence: A paid tax return preparer must take numerous steps to prepare accurate tax returns on behalf of his or her clients. Due diligence and includes reviewing the applicable tax law to establish the relevance and reasonableness of income, credits, expenses and deductions on a return. Generally, you can rely in good faith without verification on information provided by a client, but you can’t ignore the implication of the information you have. Make reasonable inquiries if the information appears to be incorrect, inconsistent or incomplete. [snip]  The article continues @ CPA Practice Advisor, click here to continue reading....


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