Pronto Tax Class Blog
IRS Sending Out "Warning" Letters to Tax Preparers
It is never a good feeling when you receive mail from the Internal Revenue Service (except, of course, when it's a refund check). Yesterday, one of our tax preparers here at Pronto arrived home to an IRS letter from the IRS essentially saying that this tax preparer needs to "watch out" when filing Schedule A, Itemized Deductions. Click "read more" to find out more about these IRS letters that are going out to "at-risk" tax preparers.
A full copy of the IRS letter sent to this tax preparer is included before. You can see that the tax preparer is being informed that it's necessary to make sure that all the tax deductions being claimed on Schedule A are correct, and that the client has sufficient substantiation (i.e. receipts) to claim said deductions. Many clients, as we all know, do not have all their receipts and may be vulnerable to an IRS audit.
Letters such as these, then, remind the professional tax preparer to remind the taxpayer (client) that receipts or proof of payment is necessary for all deductions claimed on a tax return. Many taxpayers may have a fuzzy idea that they're supposed to keep receipts, but we believe that we are going to see more and more of these "warning" letters in future years.
As a tax preparer, you must take your obligation to follow the IRS tax code seriously--as noted in this letter, fines can be steep. These IRS letters to tax preparers are going out by the thousands before this tax season as the IRS tightens up its enforcement efforts. Some letters are regarding the Earned Income Credit and others are focused on particular forms such as the Schedule A, B, and C.
We anticipate that this newfound vigilance by the IRS will put many shady tax preparers out of business over the next few years, as the IRS competency exam kicks in, tax preparers face more scrutiny, and more clients get audited due to tax preparer incompetency / negligence.
Even a good tax preparer who follows the rules, such as our tax preparer who got this letter, will need be extra-aware that now is probably not a good time to use the "same as last year" approach to itemizing deductions. FYI!