IRS Letters to EITC Claim Preparers Warn of Possible Audits

Monday, October 13, 2014 9:20 PM | NCSA Website Manager (Administrator)
Tax preparers who previously filed questionable earned income tax credit claims will begin getting warning letters from the IRS this month. 
 
The EITC warning letters, announced in the Internal Revenue Service's Oct. 2 QuickAlerts for tax professionals, discuss the primary issues identified on the returns and the consequences of filing inaccurate claims for EITC.  The letters will remind tax preparers of their due diligence requirements. Preparers who do not meet the requirements face a penalty of $500 per return.  
 
The letters also advise preparers the IRS will monitor the EITC claims they complete, that the IRS will be visiting them and, in some instances, auditing their clients' returns for either tax years 2013 or 2014, or both. Letter 5138, Return Preparer EITC Client Audit Notification, will be included with the warning letters. The letters will continue to be sent through December, the IRS said.
 
The IRS is sending the letters because it estimates that 22 to 26 percent of all EITC claims have some type of mistake that cost the government between $13.3 and $15.6 billion in 2013. "Some errors are caused by misinterpreting the law; some because the preparer accepted client-provided information at face value and others are outright fraud," the agency said.  "You, as part of the tax preparation community, are crucial in stemming these errors because paid preparers create the majority of EITC claims."
 
The three most common EITC errors involve claiming a child who isn't a qualifying child, married taxpayers who incorrectly file as single or head of household, and income-reporting errors, which account for more than 60 percent of erroneous claims.
 
The IRS's EITC information page for tax professionals is here.


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