ALERT – Page 2 – Larson Accounting Group

8 de July de 2024

The Internal Revenue Service today warned taxpayers not to fall victim to a new emerging scam involving buying clean energy tax credits.

In this latest scam, the IRS is seeing instances where unscrupulous tax return preparers are misrepresenting the rules for claiming clean energy credits under the Inflation Reduction Act (IRA).

The transferability provisions of the IRA enable the purchase of eligible federal income tax credits from investments in clean energy to offset a buyer’s tax liability. The IRS has seen taxpayers file returns using unscrupulous return preparers who are claiming purchased clean energy credits that the taxpayer is ultimately unable to benefit from.

The scam is generally targeting individuals who file Form 1040. The preparers file returns that have individuals improperly claiming IRA credits that offset income tax from sources such as wages, Social Security and retirement account withdrawals.

Individuals purchasing tax credits under the IRA are subject to the passive activity rules for any purchased credits. Generally, this means they can only use purchased credits to offset income tax from a passive activity. Most taxpayers do not have passive income and a passive income tax liability. Most investment activities are not considered passive.

“This is another example where scammers are trying to use the complexity of the tax law to entice people into claiming credits they’re not entitled to,” said IRS Commissioner Danny Werfel. Taxpayers should be wary of promoters pushing dubious credits like this and others. The IRS is watching out for this scam, and we urge people to use a reputable tax professional before claiming complex credits like clean energy.”

The IRS noted individual taxpayers claiming inappropriate credits risk future compliance action by the IRS and are responsible for repaying the inflated credit, plus interest and possible penalties.

Individual taxpayers considering purchasing clean energy credits under the IRA should consult a trusted tax professional for advice on whether they are eligible to purchase credits and claim the tax benefits. They should also understand how the limitations under the passive activity rules, and other portions of the tax code, may apply to their particular tax situation.

More information about clean energy can be found on the Inflation Reduction Act of 2022 page on IRS.gov.

The IRS continues to warn taxpayers about other scams it continues to see that are misleading taxpayers into filing inappropriate claims for other tax credits. The IRS has warned taxpayers not to fall for scams centered around the Fuel Tax Credit, the Sick and Family Leave Credit and household employment taxes. Fueled by misleading social media advice and promoters, the IRS has seen thousands of dubious claims come in earlier this year where it appears taxpayers are claiming credits for which they are not eligible, leading to refunds being delayed and the need for taxpayers to show they have legitimate documentation to support these claims.

Report fraud

The IRS is committed to investigating paid tax return preparers who act improperly. To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242 PDF and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677 3405
Fax: 877-477-9135

Taxpayers and tax professionals can also submit this information to the IRS Whistleblower Office, where they may be eligible for a monetary award. For details, refer to Abusive tax schemes and abusive tax return preparers on IRS.gov.

Source: IRS-2024-182, July 3, 2024

by Larson Accounting

24 de June de 2024

can-i-get-a-tax-deduction-after-a-natural-disaster-1280x720.jpg

Tax relief is available for people living in areas declared disasters by the Federal Emergency Management Agency. To find out if an area qualifies for disaster tax relief, check IRS news from around the nation.

Affected taxpayers have more time to file and pay

If people live at an address in an area that qualifies for IRS disaster tax relief, they automatically get extra time from the IRS to file returns and pay taxes.

Casualty loss tax deduction

If people have damaged or lost property due to a federally declared disaster, they may qualify to claim a casualty loss deduction and get a larger refund. They can claim this on their current or prior-year tax return.

Rebuild lost records with a tax return transcript

If people have lost their tax records, they can request a tax return transcript and a copy of their tax return from the IRS.

People can get tax return transcripts online or request mail delivery with Get Transcript. Taxpayers can also file Form 4506-T, Request for Transcript of Tax Return.

To get a copy of a tax return, people can file Form 4506, Request for Copy of Tax Return. The IRS waives the fees and expedites these requests for people who need to apply for disaster-related benefits or file amended returns to claim disaster-related losses.

To speed up the process, people who file Forms 4506-T or 4506 should:

Write on the form that the request is disaster related.
Write the type of disaster and the state where it occurred.

People who relocate need to submit a change of address

After a disaster, people might need to relocate. Taxpayers should use their current address when filing their tax return. If the they move after filing, they should update their address with the IRS by calling the IRS Disaster Hotline at 866-562-5227, or by filing Form 8822, Change of AddressPDF. The IRS also recommends that taxpayers notify the post office serving the old address.

Small Business Administration loans and grants

The Small Business Administration offers disaster assistance to business owners, homeowners and renters in a federally declared disaster area. To qualify for an SBA loan or grant, people must have filed all required tax returns.

More information

Source: IRS Tax Tip 2024-60, June 24, 2024

by Larson Accounting

28 de May de 2024

The Department of Treasury and Internal Revenue Service today released a corrected version of Notice 2024-41PDF. A prior version was released on May 16, 2024.

Today’s corrected version reflects text that was inadvertently omitted while releasing the document.

Specifically, on page 16, in the left column of the Solar PV Table in Table 1 – New Elective Safe Harbor, the following applicable project components (APC) were omitted from Table 1: Steel Photovoltaic Module Racking, Pile or Ground Screw, and Steel or Iron Rebar in Foundation, and the word “Total.”

Notice 2024-41 modifies an existing safe harbor and provides a new elective safe harbor for determining domestic content bonus credit amounts. For more information about Notice 2024-41 see IR-2024-140.

Source: IRS-2024-147, May 24, 2024

by Larson Accounting

13 de May de 2024

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2024.

For individuals, the rate for overpayments and underpayments will be 8% per year, compounded daily. Here is a complete list of the new rates:

8% for overpayments (payments made in excess of the amount owed), 7% for corporations.
5.5% for the portion of a corporate overpayment exceeding $10,000.
8% for underpayments (taxes owed but not fully paid).
10% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during April 2024. See the revenue ruling for details.

Revenue Ruling 2024-11PDF announcing the rates of interest will appear in Internal Revenue Bulletin 2024-24, dated June 10, 2024.

Source: IRS-2024-138, May 9, 2024

by Larson Accounting

8 de May de 2024

The Internal Revenue Service today reminded the 1 million people who didn’t file their tax year 2020 returns they may be eligible for a refund if they file by the May 17 deadline.

The IRS estimates more than $1 billion in refunds remain unclaimed because people haven’t filed their 2020 tax returns yet. The state-by-state table below shows how many people are potentially eligible for these refunds, and the average median refund in each state.

There’s no penalty for failure to file if a refund is due. However, a return claiming a refund must be filed within three years of its due date for a refund to be allowed. After the expiration of the three-year period, the refund statute generally prevents the issuance of a refund check and the application of any credits, including overpayments of estimated taxes or withholding amounts, to other tax years that are underpaid.

For 2020 tax returns, people have a little more time than usual to file their claim for refunds. Typically, the filing deadline to claim old refunds falls around the tax deadline of April 15. However, the 2020 filing deadline was pushed to May 17, due to COVID-19, making the three-year window deadline for 2020 unfiled returns May 17, 2024. The IRS issued Notice 2023-21 on Feb. 27, 2023, providing legal guidance on claims required by the postponed deadline.

Many people who didn’t file may be eligible for more

By missing out on filing a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2020. The estimate does not include credits that non-filers may be eligible to receive. Credits include the Earned Income Tax Credit (EITC), the Recovery Rebate Credit or other credits that may be applicable.

Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2020, the EITC was worth as much as $6,660 for taxpayers with qualifying children. The EITC helps individuals and families whose incomes are below certain thresholds.

The IRS has previously reminded those who may be entitled to the COVID-era Recovery Rebate Credit in 2020 that time is running out to file a tax return and claim their money. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, distributed in 2020 and 2021.

Plan to file? IRS offers options to get key documents

Gathering all the necessary documents and forms to file a return for 2020 may take some time. People should start as soon as possible to make sure they have enough time to file before the May 17 deadline for 2020 refunds. Here are some options:

Request copies of key documents. Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2020, 2021 or 2022 can request copies from their employer, bank or other payers.
Use Get Transcript Online at IRS.gov. Taxpayers who have lost contact with their employer or other payers can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. For many taxpayers, this is by far the quickest and easiest option.
Request a transcript. Another option is for people to file Form 4506-T, Request for Transcript of Tax Return, with the IRS to request a “wage and income transcript.” A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return. But plan ahead – these written requests can take several weeks; people are strongly urged to try the other options first.
Current and prior years’ tax forms. Tax year 2020 Forms 1040 and 1040-SR and instructions are available on the IRS.gov Forms, instructions & publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

Taxpayers who are unsure if they are required to file a return can visit Do I need to file a tax return? or refer to Publication 17, Your Federal Income Tax (For Individuals).

Free help is available

For individuals who have not filed a federal income a tax return for 2020, the IRS offers tools and resources on IRS.gov. Free support includes the Interactive Tax Assistant (ITA), information on What to do if you haven’t filed your return, and Frequently asked questions and answers (FAQs).

Qualified taxpayers can also access free tax preparation assistance through the Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs. Use the VITA Locator Tool or call 800-906-9887 to locate the nearest VITA site.

The IRS also reassures taxpayers there is no penalty for claiming a refund on a late-filed tax return. Direct deposit is recommended as the quickest and simplest way to receive a tax refund.

State-by-state estimates of individuals who may be due 2020 income tax refunds

The IRS estimated the number of individuals in each state and the median potential refund a filer may be entitled to receive. The actual refund amount will vary based on a household’s tax situation.

State ordistrict	Estimatednumber of individuals	Medianpotential refund	Totalpotential refunds *
Alabama	15,200	$926	$16,839,800
Alaska	3,700	$931	$4,335,300
Arizona	25,400	$871	$26,939,600
Arkansas	8,700	$923	$9,392,600
California	88,200	$835	$94,226,300
Colorado	18,500	$894	$20,109,900
Connecticut	9,800	$978	$11,343,600
Delaware	3,600	$945	$4,156,500
District of Columbia	2,900	$968	$3,503,800
Florida	53,200	$891	$58,210,500
Georgia	36,400	$900	$39,175,600
Hawaii	5,200	$979	$5,972,600
Idaho	4,500	$761	$4,369,600
Illinois	36,200	$956	$40,608,000
Indiana	19,200	$922	$20,893,000
Iowa	9,600	$953	$10,601,700
Kansas	8,700	$900	$9,285,600
Kentucky	10,600	$920	$11,236,300
Louisiana	15,100	$957	$17,357,300
Maine	3,800	$923	$4,030,200
Maryland	22,200	$991	$26,365,400
Massachusetts	21,800	$975	$25,071,800
Michigan	34,900	$976	$38,274,800
Minnesota	13,500	$818	$14,043,900
Mississippi	8,100	$861	$8,685,000
Missouri	19,500	$893	$20,803,400
Montana	3,400	$851	$3,632,100
Nebraska	4,700	$901	$5,007,300
Nevada	10,200	$890	$11,143,900
New Hampshire	4,200	$982	$4,923,100
New Jersey	24,400	$920	$27,408,300
New Mexico	6,500	$868	$7,032,700
New York	51,400	$1,029	$60,837,400
North Carolina	27,500	$895	$29,304,100
North Dakota	2,200	$953	$2,482,600
Ohio	31,400	$909	$32,939,900
Oklahoma	14,300	$902	$15,566,900
Oregon	15,300	$847	$15,857,800
Pennsylvania	38,600	$1,031	$43,412,900
Rhode Island	2,600	$986	$2,980,500
South Carolina	11,900	$840	$12,564,900
South Dakota	2,200	$892	$2,346,300
Tennessee	16,800	$909	$18,007,000
Texas	93,400	$960	$107,130,200
Utah	7,800	$836	$8,191,700
Vermont	1,700	$911	$1,818,600
Virginia	25,900	$914	$28,944,600
Washington	26,200	$976	$31,110,300
West Virginia	3,800	$950	$4,130,400
Wisconsin	11,800	$837	$12,139,400
Wyoming	2,100	$961	$2,416,300
Totals	938,800	$932	$1,037,161,300

* Excluding credits.

Source: IRS-2024-133, May 6, 2024

by Larson Accounting

16 de April de 2024

The Internal Revenue Service is waiving penalties to companies that fail to pay their estimated taxes for the first quarter for the corporate alternative minimum tax.

In Notice 2024-33, the IRS said Monday the relief notice applies only for calculating the installment of estimated income tax of a corporate taxpayer that’s due on or before April 15, 2024, or for companies whose tax year starts in February, until May 15, 2024.

The notice waives any tax penalties under Section 6655 of the Tax Code to the extent the amount of any underpayment can be attributed to the portion of the corporate alternative minimum tax liability due in that installment.

Last June, the Treasury Department and the IRS issued a notice that waived CAMT tax penalties for any tax year that starts after Dec. 31, 2022, and before Jan. 1, 2024. But that time has since passed, so a new notice was needed until final regulations are issued. Last year, the Treasury Department and the IRS announced they intended to issue forthcoming proposed regulations addressing the application of the CAMT. They provided interim guidance to clarify the application of certain aspects of the CAMT. Affected taxpayers need to file Form 2220 with their federal income tax return, even if they owe no estimated tax penalty, to avoid a penalty notice.

The instructions to Form 2220, “Underpayment of Estimated Tax by Corporations,” will be modified to provide specific instructions on how to avoid a penalty notice and to clarify that no addition to tax will be imposed under Section 6655 based on a corporation’s failure to make an estimated tax payment of its CAMT liability for the installment of estimated tax that is due on or before April 15, 2024, or on or before May 15, 2024 (in the case of a fiscal year taxpayer with a taxable year beginning in February 2024), and that a company can exclude those amounts when calculating the amount of its required annual payment on Form 2220.

Source: AccountingToday

by Larson Accounting

8 de April de 2024

WASHINGTON — In day seven of the Dirty Dozen tax scam series, the Internal Revenue Service and Security Summit partners today alerted taxpayers to be on the lookout for unscrupulous tax preparers who could encourage people to file false tax returns and steal valuable personal information.

A common problem seen annually during tax season, “ghost preparers” pop up to encourage taxpayers to take advantage of tax credits and benefits for which they don’t qualify. These preparers can charge a large percentage fee of the refund or even steal the entire tax refund. After the tax return is prepared, these “ghost preparers” can simply disappear, leaving well-meaning taxpayers to deal with the consequences.

While most tax professionals offer quality service, these ghost preparers and other unscrupulous preparers try to take advantage of people and should be avoided at all costs. The IRS encourages people to use a trusted tax professional, and IRS.gov has important information to help people choose a reputable, accredited practitioner.

“Ghost preparers and other shady return preparers form a real threat every tax season to well-meaning taxpayers,” said IRS Commissioner Danny Werfel. “By trying to make a fast buck, these scammers prey on seniors and underserved communities, enticing them with bigger refunds by including bogus tax credit claims or making up income or deductions. But after the tax return is filed, these ghost preparers disappear, leaving the taxpayer to deal with consequences ranging from a stolen refund to follow-up action from the IRS. We urge people to choose a trusted tax professional that will be around if questions arise later.”

Unethical tax preparers serve as day seven of the annual IRS Dirty Dozen campaign – a list of 12 scams and schemes to help taxpayers and the tax professional community protect their personal and financial information. Compiled annually since 2002, the Dirty Dozen lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes.

Bogus tax preparers have been a recurring theme in the Dirty Dozen for years. Anyone can file a tax return because preparing tax returns is unregulated, which adds risks for vulnerable taxpayers during filing season. To protect taxpayers, the IRS and the Treasury Department have again proposed regulating tax practitioners as part of the proposed Fiscal Year 2025 budget.

Shady tax practitioners can also be involved in stealing taxpayer identities. As a member of the Security Summit, the IRS has worked with state tax agencies and the nation’s tax industry for nine years to cooperatively implement a variety of internal security measures to protect taxpayers. The collaborative effort by the Summit partners also has focused on educating taxpayers about scams and fraudulent schemes throughout the year, which can lead to tax-related identity theft. Through initiatives like the Dirty Dozen and the Security Summit program, the IRS strives to protect taxpayers, businesses and the tax system from cyber criminals and deceptive activities that seek to extract information and money, including ghost preparers.

Tips for taxpayers: Warning signs to look out for

Most tax return preparers provide honest, high-quality service. But some may cause harm through fraud, identity theft and other scams. Paid preparers must sign and include a valid preparer tax identification number (PTIN) on every tax return. A ghost preparer is someone who doesn’t sign tax returns they prepare. These unethical tax return preparers should be avoided, especially if they refuse to sign a complete paper tax return or digital form when filing electronically.

Taxpayers are also encouraged to check the tax preparer’s credentials and qualifications to make sure they are capable of assisting with the taxpayer’s needs. The IRS offers resources for taxpayers to educate themselves on types of preparers, representation rights, as well as a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help choose which tax preparer is the best fit.

Some of the warning signs of a bad preparer include:

Shady fees. Taxpayers should always ask about service fees. Shady tax preparers can ask for a cash-only payment without providing a receipt. They are also known to base their fees on a percentage of the taxpayer’s refund.
False income. Untrustworthy tax preparers may also invent false income to try to get their clients more tax credits or claim fake deductions to boost the size of the refund.
Wrong bank account. Taxpayers should also be wary of a tax preparer attempting to convince them to deposit the taxpayer’s refund in their bank account rather than the taxpayer’s account.

Good preparers ask to see all relevant documents like receipts, records and tax forms. They also ask questions to determine the client’s total income, deductions, tax credits and other items. Taxpayers should never hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is also against IRS e-file rules.

File accurately and check eligibility for credits and deductions

Taxpayers are ultimately responsible for all the information on their income tax return, regardless of who prepares it. Taxpayers can visit IRS.gov to find answers to tax-related questions and access tools like the Interactive Tax Assistant, which provides answers to several tax law questions specific to individual circumstances.

Filing electronically reduces tax return errors, and people can take advantage of free online and in-person tax preparation options if they qualify through programs like IRS Free File and the Volunteer Income Tax Assistance and Tax Counseling for the Elderly.

Taxpayers should also make sure that they are taking advantage of available credits and deductions, like the Earned Income Tax Credit (EITC), which is refundable and can help low-to-moderate income workers receive up to $7,340 based on their qualifications. People need to make sure they understand which credits and deductions they are eligible to claim and keep records to show their eligibility.

Report fraudulent activity and scams

The IRS highly encourages people to report tax return preparers who deliberately prepare improper returns and any activity that promotes improper and abusive tax schemes.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242 – Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed Form 14242PDF and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, CA 92677-3405
Fax: 877-477-9135

Taxpayers can also report preparer misconduct using Form 14157, Complaint: Tax Return PreparerPDF. If a taxpayer suspects a preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct AffidavitPDF.

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary award.

Source: IRS-2024-96, April, 2024

by Larson Accounting

6 de February de 2024

The Internal Revenue Service today reminded taxpayers that carefully choosing a tax professional to prepare a tax return is vital to ensuring that their personal and financial information is safe and secure and treated with care.

Most tax return preparers provide honest, high-quality service. But some may cause harm through fraud, identity theft and other scams.

It is important for taxpayers to understand who they’re choosing and what important questions to ask when hiring an individual or firm to prepare their tax return.

Another reason to choose a tax preparer carefully is because taxpayers are ultimately legally responsible for all the information on their income tax return, regardless of who prepares it.

The IRS has put together a Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help individuals find a tax pro that meets high standards. There is also a special page on IRS.gov for Choosing a Tax Professional that can help guide taxpayers in making a good choice, including selecting someone affiliated with a recognized national tax association. There are different kinds of tax professionals, and a taxpayer’s needs will help determine which kind of preparer is best for them.

Red flags to watch out for

There are warning signs that can help steer taxpayers away from unscrupulous tax return preparers. For instance, not signing a tax return is a red flag that a paid preparer is likely not to be trusted. They may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

These unscrupulous “ghost” preparers often print the return and have the taxpayer sign and mail it to the IRS. For electronically filed returns, a ghost preparer will prepare the tax return but refuse to digitally sign it as the paid preparer. Taxpayers should avoid this type of unethical preparer.

In addition, taxpayers should always choose a tax professional with a valid Preparer Tax Identification Number. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid PTIN. Paid preparers must sign and include their PTIN on any tax return they prepare.

Other tips

Here are a few other tips to consider when choosing a tax return preparer:

Look for a preparer who’s available year-round. If questions come up about a tax return, taxpayers may need to contact the preparer after the filing season is over.

Review the preparer’s history. Check the Better Business Bureau website for information about the preparer. Look for disciplinary actions and the license status for credentialed preparers. For CPAs, check the State Board of Accountancy’s website, and for attorneys check with the State Bar Association. For enrolled agents go to IRS.gov and search for “verify enrolled agent status” or check the IRS Directory of Federal Tax Return Preparers.

Ask about service fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of the refund into their own financial accounts. Be wary of tax return preparers who claim they can get larger refunds than their competitors.

Find an authorized IRS e-file provider. They are qualified to prepare, transmit and process e-filed returns. The IRS issues most refunds in fewer than 21 days for taxpayers who file electronically and choose direct deposit.

Provide records and receipts. Good preparers ask to see these documents. They’ll also ask questions to determine the client’s total income, deductions, tax credits and other items. Do not hire a preparer who e-files a tax return using a pay stub instead of a Form W-2. This is against IRS e-file rules.

Understand the preparer’s credentials and qualifications. Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. Annual Filing Season Program participants may represent taxpayers in limited situations if they prepared and signed the tax return.

Never sign a blank or incomplete return. Taxpayers are responsible for filing a complete and correct tax return.

Review the tax return before signing it. Be sure to ask questions if something is not clear or appears inaccurate. Any refund should go directly to the taxpayer – not into the preparer’s bank account. Review the routing and bank account number on the completed return and make sure it’s accurate.

Taxpayers can report preparer misconduct to the IRS using Form 14157, Complaint: Tax Return PreparerPDF. If a taxpayer suspects a tax return preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct AffidavitPDF.

Source: IRS-2024-31, Feb. 01, 2024

by Larson Accounting

24 de January de 2024

Shorter, clearer letters to reduce taxpayer confusion; about 170 million notices sent to individual taxpayers annually

The Internal Revenue Service today announced work is underway on the Simple Notice Initiative, a sweeping effort to simplify and clarify about 170 million letters sent annually to taxpayers.

Part of the larger transformation work taking place at the IRS with Inflation Reduction Act funding, the Simple Notice Initiative will build off redesigned notice efforts in place for the 2024 tax season and expand on a recent successful pilot involving identity theft letters.

The Simple Notice Initiative will review and redesign hundreds of notices with an immediate focus on the most common notices that individual taxpayers receive. The redesign work will accelerate during the 2025 and 2026 filing seasons, improving common IRS letters going out to individual taxpayers and then expanding into notices going to businesses.

The IRS sends about 170 million notices to individual taxpayers every year, covering a range of issues from claiming the credits and deductions for which they are eligible for as well as meet their tax obligations. These notices are often long and difficult for taxpayers to understand. And they do not always clearly and concisely communicate the next steps a taxpayer must take.

“Simplifying and clarifying these letters will make it easier for taxpayers to understand the tax issues involved,” said IRS Commissioner Danny Werfel. “This will help reduce questions and save headaches for taxpayers, the tax professional community as well as the IRS. Improving these letters is also critical to our internal operations at the IRS, and an important part of our transformation efforts. Clearer letters can create a ripple effect, reducing taxpayer phone calls and visits and freeing up IRS staff to help others.”

This initiative builds on the IRS Paperless Processing initiative announced in August 2023 to advance the goal of providing world-class customer service to taxpayers. With these initiatives, taxpayers have the option to go paperless and conveniently submit necessary responses online, and taxpayers will receive clearer and more concise notices from the IRS, so they better understand the actions they need to take.

Filing season 2024: IRS reviewed, redesigned 31 notices

The Simple Notice Initiative builds on the IRS’s continuous effort to improve notices. During the last year, the IRS reviewed and redesigned 31 notices in time for this year’s tax season. The IRS sent about 20 million of these notices in calendar year 2022.

These include notices to taxpayers who served in combat zones that may be eligible for tax deferment, notices that remind a taxpayer that they may have unfiled returns and notices that remind a taxpayer about their balance due and where they can go for assistance.

Filing season 2025: IRS will review, redesign most common notices sent to individual taxpayers

By filing season 2025, the IRS will review and redesign the most common notices that individual taxpayers receive. The IRS will focus on up to 200 notices that make up about 90% of total notice volume sent to individual taxpayers. This represents about 150 million notices sent to individual taxpayers in 2022.

These include notices to propose adjustments to a taxpayer’s income, payments, credits, and/or deductions, notices to correct mistakes on a taxpayer’s tax return and notices to remind a taxpayer of taxes owed.

The IRS will be actively engaging with taxpayers and the tax professional community to gather feedback on how these notices should be redesigned.

Filing season 2026 and beyond: IRS will review, redesign notices sent to businesses taxpayers as well as less common notices sent to individual taxpayers

The IRS sends over 40 million notices to business taxpayers every year. In future filing seasons, the IRS will review and redesign notices sent to business taxpayers.

The IRS will also review and redesign less common notices sent to individual taxpayers.

Additional detail on the plan to redesign these notices will be shared in future updates.

Recent notice pilot shows how a redesigned notice can improve taxpayer experience while reducing call volume

The IRS is committed to delivering a better taxpayer experience through notices, over the phone, online and in-person. While taxpayers will always have the option to call, the IRS also wants to make it easier for taxpayers to resolve issues without having to pick up the phone. Plain language notices can help the IRS achieve this goal.

For example, the IRS recently conducted a pilot that sent redesigned versions of Notice 5071C to a subset of taxpayers. The Notice 5071C asks taxpayers to verify their identity and tax return online or over the phone to prevent the processing of fraudulent tax returns. As part of the redesign, the IRS shortened the 5071C notice from seven pages to two pages. The IRS also improved readability of the notice by updating the font and adding visual enhancements such as headers, icons and step-by-step instructions.

The IRS also clarified instructions and added a QR code that directs taxpayers to the IRS webpage where they can respond to the notice online instead of responding over the phone. See below for an overview of improvements that were made.

The IRS sent the redesigned Notice 5071C to 60,000 taxpayers. Compared to taxpayers who received the original notice, there was a 16% reduction in taxpayers who called the IRS as their first action, and a 6% increase in taxpayers who used the online option. The IRS will apply lessons learned from this pilot, among others, to the new initiative. These changes to this notice will be put in place during coming months.

Notice 5071C: Before and after redesign shows changes

Source: IRS-2024-19, Jan. 23, 2024

by Larson Accounting

26 de December de 2023

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As people get ready for tax filing season, it’s important that they select tax return preparers with the skills, education and expertise to prepare tax forms properly. Taxpayers are ultimately responsible for all the information on their tax return, regardless of who prepares it.

There are many types of tax preparers, including certified public accountants (CPAs), enrolled agents, attorneys and others. A taxpayer should choose a tax preparer that works best for their needs.

Here are some tips to help people choose a preparer.

Checklist for choosing a tax pro

Before hiring a tax preparer:

Check the preparer’s history with the Better Business Bureau. Taxpayers can also verify an enrolled agent’s status on IRS.gov.
Ask about fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of their refund into their financial accounts. Taxpayers should be suspicious of preparers claiming they can get larger refunds than other tax preparers.
Ask if the preparer plans to use e-file. The fastest way to get a tax refund is by e-filing and choosing direct deposit.
Choose a firm or individual with a track record. Preparers may need to answer questions about the tax return months or even years later.
Ensure the preparer signs the tax return and includes their Preparer Tax Identification Number. Paid tax return preparers must have a PTIN and include it on any tax return they prepare.
Consider the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in tax matters. Other tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights to represent taxpayers during audits of returns they prepared.

Watch out for tax preparer scams

Tax return preparer fraud is a common tax scam. Here are tips on avoiding unscrupulous tax preparers.

The IRS is committed to investigating paid tax return preparers who act improperly. Taxpayers can file a complaint if they have been financially impacted by a tax return preparer’s misconduct or improper tax preparation practices.

Source: IRS Dec. 2023