When you decide that you don’t have the time or inclination to do your own tax returns, you need to use the services of a qualified tax preparer. But how do you choose one that is honest, accurate and reasonably priced?

The IRS has created a short video called “Tax Tips: Choosing a Tax Preparer” that gives taxpayers information on how to choose a tax preparer.

Daniel Stoica Accounting Professional

The Earned Income Tax Credit (EITC) is a popular tax credit for low-and moderate-income workers and working families. Approximately one in five eligible taxpayers do not claim the EITC, but many who do claim the credit do so incorrectly or are even ineligible. In order to ensure that the credit is taken by those taxpayers who do qualify, the IRS is now requiring all paid tax return preparers to file a due diligence checklist, or Form 8867, with any federal tax return that is claiming the EITC. This form is normally required to be completed and filed in a preparer’s records, but now the form must also be included with the returns.

Unlike most deductions and credits, the EITC is refundable, meaning that taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit is $5,751.

To make sure that eligible taxpayers receive the correct credit amount, this new reporting regulation requires preparers to file the Form 8867 with each return that claims the EITC, effective January 1, 2012. In addition, the penalty for noncompliance with the due diligence requirement has increased from $100 to $500.

More information about EITC and the due diligence requirement for tax return preparers is available on IRS.gov.

Daniel Stoica Accounting Professional

The IRS is launching a new Registered Tax Return Preparer competency test in an effort to improve the tax preparation industry. Oversight of the tax preparation industry is a major initiative of the IRS, and this competency test is part of that initiative.  As of 2010, all paid tax return preparers are required to obtain a Preparer Tax Identification Number (PTIN), and now all preparers who have a valid PTIN will have until 12/31/2013 to pass the competency test.

Once a preparer passes the test and meets other requirements, he or she will be designated as a Registered Tax Return Preparer.  Like other designations, the Registered Preparers will be required to maintain their status by renewing their PTINs annually as well as completing 15 hours of continuing education every year.  Attorneys, Certified Public Accountants and Enrolled Agents will be exempt from these new requirements because they must already meet more rigorous guidelines in order to obtain their professional credentials.

There will be a fee for the competency test: $116.  This fee includes an IRS fee as well as a fee for Prometric Inc., which is a third-party test vendor.  The test covers preparation of Form 1040 and related schedules.  Test scheduling will begin the week of November 28, 2011.

Prometric will eventually administer the test at more than 260 centers nationally, but the test is not available at all locations currently. Test sites will be added daily and international locations may be added in the future.

The IRS estimates that approximately 350,000 people may be initially subject to the Registered Tax Return Preparer test requirement.

Fact Sheet 2011-12 provides additional details about the test, including which preparers are required to take it and how to schedule an appointment.

Daniel Stoica Accounting Professional

The IRS is informing professionals and accounting firms that they need to get EFINs (Electronic Filing Identification Numbers) in order to be compliant for the 2012 e-filing requirements (if they haven’t already received an EFIN).

Beginning in January of 2012, paid preparers who will be preparing and filing more than eleven 1040 or 1041 forms must e-file with the IRS. Individuals and businesses who file their own taxes still have the option of filing their returns on paper.

Tax preparers must create an e-services account in order to be an authorized IRS e-filer. They will have to send an EFIN application and pass the necessary tests. The process takes at least 45 days. Individuals and tax firms only need one EFIN.

Next year’s requirements are the second and final part of a law that was created to help e-filing become the main method of tax filing for individuals, trusts and estates. For 2011, the e-filing requirement was meant for paid preparers and tax firms who filed at least 100 tax returns. In 2011, the rate for returns that were sent via e-filing increased by more than 12%.

80% of tax returns are filed online and the IRS has estimated that almost 1 billion tax returns were filed electronically safely and securely since e-filing began in 1990.

Professional tax preparers can see how the process works on www.irs.gov at “Become an Authorized e-file Provider” or by accessing the FAQ section.

If this new requirement causes hardship for preparers, they may request a waiver for one year by sending an 8894 Form (“Preparer e-file Hardship Waiver Request”). If a client asks for a paper return be sent to the IRS, the preparer must send an 8948 Form “Preparer Explanation for Not Filing Electronically” with the tax return. All forms must be kept with the preparers records.

Daniel Stoica Accounting Professional

If you are like many Americans, you usually pay someone to prepare your tax return.  As with any individual or company that you ask to perform a service for you, it’s a good idea to do some research before you choose a tax preparer.  Even if you have someone else prepare your taxes, you are still legally responsible for what is on your tax return.

Here are some tips for finding the best tax preparer for you:

-Ask questions. Ask the preparer how he/she keeps up to date on changes in the tax code and what, if any, organizations he/she belongs to that would provide continuing education and resources.  Effective 2011, all paid tax preparers must have a Preparer Tax Identification Number (PTIN) that must be renewed every year.

-Check out the preparer’s fees.  Preparers should not base their fees on a percentage of your refund.  Also, check out several preparers in your area to see what the average fee is.  The fees should not be either too high or too low for your area and type of tax return.

-Do not sign a blank return, and run away from any preparer who asks you to do so.  It is your duty to sign the forms after you review them.  Also, make sure that your preparer signs the forms and includes his/her PTIN.

-Choose a preparer who looks permanent.  It may be important to contact your preparer after your return has been filed, so it’s a good idea to use one who doesn’t have a “fly by night” sort of operation.  Ask for a referral from a trusted friend or relative, or take a look at online sites that provide user reviews.

-Inspect the preparer’s history.  You can always check the Better Business Bureau to see if a preparer has several complaints.  CPA’s and attorneys have their own regulatory organizations that you can check as well.

Daniel Stoica Accounting Professional

The IRS is providing seminars for tax professionals that allow them to earn continuing professional education credits online. These seminars are available here: http://www.irstaxforumsonline.com/

The seminars have downloadable transcripts and PowerPoint slides as well as interactive videos that are synchronized with slides.

Topics covered include tax law updates, changes to information on IRS procedures and processes, the small business health care tax credit and several others.

Users can learn at their own pace and at any time of day or night. Users can also earn continuing professional education credits (CPEs) for a fee. To earn these credits, users need to create an account, answer chapter review questions and pass a short test at the end of each seminar.

Daniel Stoica Accounting Professional

The IRS recently announced that there will be an educational webinar about the reporting of employer provided healthcare coverage on the W-2 form.

This webinar will be beneficial for the following:

• Small businesses
• Payroll professionals
• Employers
• Tax professionals
• Attorneys
• Industry partners

The webinar will be on October 31, 2011 at 2:00pm EST.

The following topics will be covered during the webinar:

-Changes employees will see in their Form W-2 due to the coverage reporting
-When employers will need to begin reporting the cost of coverage on the Form W-2
-Which employers will need to report the cost of coverage on the Form W-2
-How employers will report the cost of coverage on the Form W-2
-What methods of evaluation employers can use to determine the amounts to report on the Form W-2

To register for the seminar, click here.

Daniel Stoica Accounting Professional

Are you having trouble finding the right tax forms? You’re in luck. You can find, download and print all of the forms you need at www.irs.gov. You can find them all in one place by clicking on “Forms & Pubs”.

No one likes having to fill out their tax forms, but it has become somewhat easier with all of the new tax software available. The IRS website has also become a wealth of information for taxpayers and preparers alike.

Below is a list of the most common tax forms:

1040 Individual Income Tax Return, 1040A Individual Income Short Form, 1040EZ Individual Income Tax Return

1099-DIV Dividend Income Worksheet, 1099-INT Interest Income Worksheet, 1099-MISC Miscellaneous Income Worksheet, 1099-MSA Medical Savings Account Distribution, 1099-R Distributions from Retirement Plans Worksheet

2441 Child and Dependent Care Expenses

5695 Residential Energy Credits

6251 Alternative Minimum Tax

8396 Mortgage Interest Credit, 8586 Low Income Housing Credit, 8829 Business Use of Your Home

8853 Medical Savings Accounts & Long Term Care Services

8863 Education Credits

8880 Credit for Qualified Retirement Savings Contributions

8885 Health Coverage Tax Credit

Schedule 1-1040A Interest & Dividend Income, Schedule 2-1040A Child and Dependent Care Expenses

Schedule A Itemized Deductions, Schedule C Profit or Loss from Business, Schedule D Capital Gains and Losses

Schedule EIC Earned Income Credit

Schedule SE Self-Employment Tax

On the IRS website, you can find many more forms that are not covered here.

Many American taxpayers use online software to fill out and file their taxes because it can be quite daunting to fill them out by hand, especially if you end up having to use 3 or 4 different forms for one tax return. The IRS website, and tax filing software, also give you useful information to help you understand what’s what, including information about credits and deductions.

If you aren’t comfortable using online websites or computer tax software, you can still fill your taxes out by hand or have your taxes done by a tax professional.

Daniel Stoica Accounting Professional

With the end of 2011 just around the corner, career opportunities with the IRS are growing. Despite the the high unemployment rate and the economy falling fast, the IRS is in the process of filling jobs, and they have been for the past year. The IRS’s job growth is not all that surprising considering everyone has to file taxes.

The efforts of the IRS to enforce their laws and codes have made it necessary for them to hire more staff to help in getting taxpayers to pay their fair share. In 2009 alone, the number of “Enforcement Agents” was at 21,059. That same year, Deputy IRS Commissioner, Linda Stiff, projected a 10% increase in IRS agents each year for the next few years. In a statement, Ms. Stiff said, “We cannot allow an environment to develop where wealthy individuals or companies can go offshore and avoid paying taxes with impunity.” The current level of job creation in IRS is quickly becoming a common occurrence.

The Health Care Bill, tax preparer oversight detection and enforcement efforts is making more work for the IRS. The IRS has been diligently working to make all taxpayers compliant, which has lead to the need for more agents. Last year, the IRS hired approximately 16,000 new agents across the U.S. to help with their efforts to find taxpayers who were not paying their taxes. Also, with the new requirements for testing and certification of tax preparers, more agents are needed to oversee compliance on these requirements. There are nearly 1.2 million tax preparers in the United States, and that means there needs to be many more agents inside the IRS to supervise. With the stronger enforcement efforts in getting hidden overseas money back into the states, more agents need to be hired to assist in that effort. With so many new laws in effect, it has been necessary for the IRS to hire new agents, and the growth seems to be continuing.

It may be safe to say that job growth at the IRS is likely to continue in the next few years. This is a major opportunity for accountants who have been struggling to find work, especially those who have expertise in tax preparation and auditing. Even though many other industries aren’t showing growth in the job market, the IRS seems to be the exception to the rule.

You can check out more information about employment with the IRS on their website: www.irs.gov.

Daniel Stoica Accounting Professional

The IRS announced that it will be sending letters to nearly 100,000 tax preparers who prepared returns this year, but didn’t follow the new PTIN (Preparer Tax Identification Number) rules. This part of the Internal Revenue Service’s oversight program of the tax preparer industry.

The IRS began an initiative to decrease the oversights of tax preparers who didn’t follow guidelines in 2010. The also began to regulate the conduct of those tax preparers. All preparers are now required to get a Preparer Tax Identification Number, or PTIN and, when preparing taxes, they must sign and include their PTINs on all tax returns refund requests they are paid to prepare.

Beginning July 7^th, 2011, the Internal Revenue Service started sending letters to preparers to preparers who had outdated PTINs or who used their Social Security numbers on the returns they prepared. This letter explained the IRS oversight program and explained how to register for a PTIN or renew an outdated one, and where to get help.

Many tax preparers have been in compliance, but some simply did not get the PTIN, so the letter from the IRS assisted them with getting in compliance. The IRS believes that everyone who is paid to prepare federal tax returns should be on the same page.

The IRS began the new PTIN registration program in the fall of 2010. Nearly 712,000 tax preparers have registered or renewed their PTINs since then. If they are not CPAs, attorneys, or Enrolled Agents, they must follow other requirements and pass a competency test and preparer suitability check. They will also be required to complete no less than 15 hours of continued education credits every year, beginning in 2010. 

The IRS is aware that some preparers might try to get out of this oversight program by not signing the returns they prepare, so taxpayers should hire a preparer who will sign their returns and add their PTINs.

The IRS’s attempts to find these “ghost preparers” will be to send letters to taxpayers who had their returns professionally prepared, but the preparer neglected to sign the tax return. The letter will let taxpayers know how to file a complaint against the preparer and will tell them how to find a preparer who is in compliance. This tactic is an effort to protect taxpayers from preparers who refuse to follow the law by being registered with the IRS.

Being in compliance is the major focus of the new program and the letter from the IRS is a step closer to getting preparers registered with new or renewed PTINs and follow the regulations. The IRS also says it will do its best to find the non-compliant preparers and meet with them face-to-face over the next two years.

Daniel Stoica Accounting Professional