Draconian IRS TAX penalties and other interesting topics
The ins and outs of the IRS: Protecting your Benefit plans, tax reductions strategies, and financial plans from abusive tax laws.
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EVENTS Find Legal Articles SEARCH Law Articles Recent Articles Articles by Location Articles by HG.org Expert Witnesses BackRecent ArticlesSubmit an Article RSS FEED Share: PRINT SHARE ON FACEBOOK SHARE ON TWITTER SHARE ON LINKEDIN SHARE ON GOOGLE+ The IRS has Turned your Accountant into their Policeman By Lance Wallach, CLU, CHFC
Every business owner thinks he pays too much in taxes, and in reality, most actually do. These days your accountant has to "play it safe". This is not reducing your tax bill.
Many times a tax preparer's work on a typical return is subject to '+interpretations+' of the tax code. New legislation may force preparers who hope to lower a client's tax bill to be less aggressive with respect to these interpretations, or else they may risk substantially increased penalties.
Furthermore, if a tax preparer's client insists on an aggressive deduction, the preparer may include a form explaining the circumstances. This could eliminate the potential preparer penalty, but it is a certain red flag for the IRS.
This should anger taxpayers who feel strongly about particular deductions. What's more, these penalties do not apply to taxpayers preparing their own returns. This could prompt a taxpayer to tell a preparer: "who needs you; I'll do it myself". The remainder of this article explains why your accountant is reluctant to be aggressive anymore, and is less likely to give you the benefit of the doubt on tax deductions.
The new law alters the standard from a "realistic possibility" that a preparer's position will be sustained to a "more likely than not" standard, or more than 50% likelihood.
Instead of paying just $250 if an interpretation is disallowed, the preparer will now be penalized the greater of $1000 or half the income derived by the preparer. Thus, if a preparer charges $500 to do a routine 1040, he or she faces losing the income on two such returns, and if "willful or reckless conduct" is found, the penalty jumps from $1000 to the greater of $5000 or half the income derived by the tax preparer. But if the taxpayer prepares his or her own return, these "crimes" may bring absolutely no penalty.
Another new wrinkle not sitting well with preparers expands these penalties beyond income tax returns to other tax work: estate & gift tax returns, excise tax returns, exempt organization returns, and e
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The IRS has Turned your Accountant into their Policeman
By Lance Wallach, CLU, CHFC
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Every business owner thinks he pays too much in taxes, and in reality, most actually do. These days your accountant has to "play it safe". This is not reducing your tax bill.
Many times a tax preparer's work on a typical return is subject to '+interpretations+' of the tax code. New legislation may force preparers who hope to lower a client's tax bill to be less aggressive with respect to these interpretations, or else they may risk substantially increased penalties.
Furthermore, if a tax preparer's client insists on an aggressive deduction, the preparer may include a form explaining the circumstances. This could eliminate the potential preparer penalty, but it is a certain red flag for the IRS.
This should anger taxpayers who feel strongly about particular deductions. What's more, these penalties do not apply to taxpayers preparing their own returns. This could prompt a taxpayer to tell a preparer: "who needs you; I'll do it myself". The remainder of this article explains why your accountant is reluctant to be aggressive anymore, and is less likely to give you the benefit of the doubt on tax deductions.
The new law alters the standard from a "realistic possibility" that a preparer's position will be sustained to a "more likely than not" standard, or more than 50% likelihood.
Instead of paying just $250 if an interpretation is disallowed, the preparer will now be penalized the greater of $1000 or half the income derived by the preparer. Thus, if a preparer charges $500 to do a routine 1040, he or she faces losing the income on two such returns, and if "willful or reckless conduct" is found, the penalty jumps from $1000 to the greater of $5000 or half the income derived by the tax preparer. But if the taxpayer prepares his or her own return, these "crimes" may bring absolutely no penalty.
Another new wrinkle not sitting well with preparers expands these penalties beyond income tax returns to other tax work: estate & gift tax returns, excise tax returns, exempt organization returns, and e