The IRS has implemented new federal income tax preparation requirements for claiming the Earned Income Tax Credit. To claim the EITC on 2011 tax returns, Form 8867 is submitted to the IRS. This form is the checklist that paid tax preparers previously retained in their records but did not send with a tax return.
Form 8867 is a due diligence measure for tax practitioners who help taxpayers claim the EITC. The new rule simply mandates including the form with completed tax returns. Providing answers to the questions on Form 8867 has always been one of the tax preparer requirements. Doing so necessitates asking taxpayers for responses.
In addition, further questions arise in many circumstances when completing Form 8867. These matters clarify potentially conflicting or incomplete information. Most tax return preparer software automatically provides relevant questions to explain any details that could seem incorrect.
The due diligence requirement is designed to reduce errors in claims for the EITC. Because tax professionals prepare the majority of returns with EITC claims, Form 8867 was created. The IRS reports that nearly two-thirds of the EITC claims last year were associated with returns prepared by tax professionals. Over 26 million people received about $59 billion of EITC claims.
Eligibility for the EITC is based upon several factors. These include earned income from working, total gross income, and filing status. In addition, the most important feature of the EITC is that taxpayers increase their eligibility for the credit when they have qualifying children. An important part of tax preparer duties is identifying qualifying children that actually meet the IRS rules. Hence, due diligence questions normally relate to identifying the location of a child's other parent and determining who cares for the child while a single parent is working.
Beneficiaries of the EITC are families and single parents with less than average income. Because the EITC is a refundable credit, the IRS remits it to eligible taxpayers even when they owe no tax. The maximum credit for 2011 tax returns is $5,751.
According to the IRS, as many as one in five eligible taxpayers fail to claim the EITC. These people are most likely in need of professional tax preparation help. However, because of the refundable nature of the EITC, many bogus claims are made each year. This is a consequence of inaccurate computations as well as incorrect declarations of qualifying children.
Tax preparers should still retain copies of Form 8867 for prior year returns. These are kept for potential IRS inspection. Effective in 2012, a Form 8867 is submitted with each return prepared by a tax practitioner that claims the EITC. A $500 penalty is assessed on any tax return preparer who fails to comply with due diligence requirements.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Form 8867 is a due diligence measure for tax practitioners who help taxpayers claim the EITC. The new rule simply mandates including the form with completed tax returns. Providing answers to the questions on Form 8867 has always been one of the tax preparer requirements. Doing so necessitates asking taxpayers for responses.
In addition, further questions arise in many circumstances when completing Form 8867. These matters clarify potentially conflicting or incomplete information. Most tax return preparer software automatically provides relevant questions to explain any details that could seem incorrect.
The due diligence requirement is designed to reduce errors in claims for the EITC. Because tax professionals prepare the majority of returns with EITC claims, Form 8867 was created. The IRS reports that nearly two-thirds of the EITC claims last year were associated with returns prepared by tax professionals. Over 26 million people received about $59 billion of EITC claims.
Eligibility for the EITC is based upon several factors. These include earned income from working, total gross income, and filing status. In addition, the most important feature of the EITC is that taxpayers increase their eligibility for the credit when they have qualifying children. An important part of tax preparer duties is identifying qualifying children that actually meet the IRS rules. Hence, due diligence questions normally relate to identifying the location of a child's other parent and determining who cares for the child while a single parent is working.
Beneficiaries of the EITC are families and single parents with less than average income. Because the EITC is a refundable credit, the IRS remits it to eligible taxpayers even when they owe no tax. The maximum credit for 2011 tax returns is $5,751.
According to the IRS, as many as one in five eligible taxpayers fail to claim the EITC. These people are most likely in need of professional tax preparation help. However, because of the refundable nature of the EITC, many bogus claims are made each year. This is a consequence of inaccurate computations as well as incorrect declarations of qualifying children.
Tax preparers should still retain copies of Form 8867 for prior year returns. These are kept for potential IRS inspection. Effective in 2012, a Form 8867 is submitted with each return prepared by a tax practitioner that claims the EITC. A $500 penalty is assessed on any tax return preparer who fails to comply with due diligence requirements.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
ليست هناك تعليقات:
إرسال تعليق