Tax Preparers Responsibility

[rcooley25]

Is it just my imagination or is the IRS more than ever before going to hold the tax preparer responsible for what is on that tax return?

[dascpa]

You know on each tax form the IRS says it should take 90 hours to prepare or something stupid.... With what has changed I probably should handle one tax return per season to do it correctly. Just the stuff for the Due Diligence Form 8867 that you're supposed to do would make every tax return an unprofitable venture.

[JRC]

YES!!.. Part of Reason I am becoming "Obsolete".

[BobKamman]

What makes you ask?

[jofijohnjoseph]

No. It is your imagination.

The IRS pursues "ghost preparers" and other frauds, but I have not seen any evidence the IRS pursues tax preparers for mistakes made on returns. It is always the client's responsibility.

[IRonMaN]

Doesn't it kinda depend on what got busted ............and if the tax preparer has a history of similar crimes against humanity?

[rcooley25]

The Due Dilligence laws

[rcooley25]

I hope you are right and I a wrong because right now I am not reading it that way. The requirement that the taxpayers bear full responsibility for what is on the tax return is ancient history

[jofijohnjoseph]

Please provide a specific example where the IRS has actually taken action against a tax preparer for erroneous information entered on a tax return completed for a client.

Something that doesn't involve making up fake children, creating fictitious businesses with phantom losses, or other obviously criminally fraudulent actions.

[rbynaker]

I haven't started prepping for 2022 tax season yet. What's the new DueDoo this year that we didn't have last year?

Arguably this year might be easier without Advance CTC payments to reconcile.

[dkh]

I'm really looking forward to not dealing with EIPs and Advance CTC.

[sjrcpa]

Rick have you looked at Page 1 of the new 1040?

[TaxGuyBill]

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@sjrcpa wrote:

Rick have you looked at Page 1 of the new 1040?

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Other than splitting up Line 1, is there anything else new that I haven't noticed yet?

[rbynaker]

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@sjrcpa wrote:

Rick have you looked at Page 1 of the new 1040?

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I looked back in August after the first draft was released and started modifying my recap spreadsheet for 2022. I think I ran into CTC and had to stop there pending some resolution to the various bills floating around Congress extending the $3,000/$3,600 (none of which have passed yet to my knowledge). I have a big CPE in two weeks to see what I missed and maybe try to at least get an idea of how much I'm going to hate dealing with all of the credit nonsense from the IRA. Or, more likely, add "you think you should get some sort of energy credit this year" to the list of criteria for clients who get fired. 🙂

Oddly enough, I actually like all of the details for wages. Seems a bit more professional than the old method of "scribble some cryptic codes in the margin."

In a perfect world, this will help the IRS computers match things better. <He says while trying to keep a straight face...>

[TaxGuyBill]

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@rbynaker wrote:

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I'm going to hate dealing with all of the credit nonsense from the IRA.

Oddly enough, I actually like all of the details for wages. Seems a bit more professional than the old method of "scribble some cryptic codes in the margin."

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It's probably because I'm getting older, but it drives me crazy that the Inflation Reduction Act has the same initials as an Individual Retirement Account. 😓

I like it too, but I'm perplexed at why Taxable Scholarships aren't on there. That seems WAY more common than taxable employer-provided adoption benefits, which has its own line.

[sjrcpa]

That's all I've noticed. I'm still doing 2021 returns and YE planning for 2022.

[rbynaker]

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@TaxGuyBill wrote:

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@rbynaker wrote:

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I'm going to hate dealing with all of the credit nonsense from the IRA.

Oddly enough, I actually like all of the details for wages. Seems a bit more professional than the old method of "scribble some cryptic codes in the margin."

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It's probably because I'm getting older, but it drives me crazy that the Inflation Reduction Act has the same initials as an Individual Retirement Account. 😓

I like it too, but I'm perplexed at why Taxable Scholarships aren't on there. That seems WAY more common than taxable employer-provided adoption benefits, which has its own line.

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+1 on the IRA/IRA.

Looks like taxable scholarships got moved to Schedule 1 Line 8r.

I also see corrective 401(k) distributions flowing to line 1 more often than some of the other things. But there are still 16 letters of the alphabet they can use for 2023 forms.

[TaxGuyBill]

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@rbynaker wrote:

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Looks like taxable scholarships got moved to Schedule 1 Line 8r.

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Oh, interesting. I missed that one.

It wonder if the IRS will still treat taxable scholarships as "earned income" for purposes of the Standard Deduction (it is "unearned" for other purposes). If I remember correctly, I couldn't find any legitimate reason for the IRS to treat it that way, so I wonder if they will continue to do so (but just because I don't remember finding a reason doesn't necessarily mean it doesn't exist 😂 ).

[rbynaker]

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@TaxGuyBill wrote:

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@rbynaker wrote:

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Looks like taxable scholarships got moved to Schedule 1 Line 8r.

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Oh, interesting. I missed that one.

It wonder if the IRS will still treat taxable scholarships as "earned income" for purposes of the Standard Deduction (it is "unearned" for other purposes). If I remember correctly, I couldn't find any legitimate reason for the IRS to treat it that way, so I wonder if they will continue to do so (but just because I don't remember finding a reason doesn't necessarily mean it doesn't exist 😂 ).

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It's still there, buried in a footnote in a worksheet in the draft instructions (PDF page 33):

https://www.irs.gov/pub/irs-dft/i1040gi--dft.pdf

"Earned income . . . also includes any taxable scholarship or fellowship grant."

[TaxGuyBill]

Have you ever found any authority for that direction to treat taxable scholarships as earned income for purposes of the standard deduction? If I remember correctly, I never could find any authority, and have wondered why the Instructions allow that.

[rbynaker]

There's a slightly outdated article in TTA that sheds some light on things:

https://www.thetaxadviser.com/issues/2019/jul/kiddie-tax-unearned-income-scholarships.html

I didn't dig into regs but a look at the code section 1 (where kiddie tax is hiding) specifically references the definition of "earned income" that's used in section 911 (foreign earned income exclusion).

In contrast, section 63(c)(5) just throws out an undefined term "earned income", leaving it up to the courts to decide. I can make an argument that clearly Congress has the power to use the definition written in IRC 911 since they chose to use that language by reference in IRC 1. So clearly they did not intend for that definition to apply when writing IRC 63. 😉 In fact, in regards to earned income, IRC 911(d) specifically states "for purposes of this section". For purposes of other sections, who knows?

In the back of my mind (behind the cobwebs) there are concepts of "worked for" scholarships (earned) and "didn't work for" scholarships (unearned). This seems to be in line with the "quid pro quo" concept mentioned in the TTA article in the section relating to athletic scholarships. Are we supposed to rely on the University to understand the difference between earned and unearned and issue a W-2 for all earned scholarships? Remember, these are the same people who still can't seem to get a 1098-T filled out correctly.