EITC Tax Audits

What is a tax return preparer?

A tax preparer is an individual who is paid to prepare tax returns and has an IRS-issued preparer tax identification number (PTIN). But buyer beware, not all tax preparers are equal.

Some tax return preparers enjoy nearly unlimited representation rights and can stand for clients during audits, payment issue disputes, and appeals. Enrolled agents, tax attorneys, and certified public accountants typically fall into this category. PTIN holders who only participate in the Annual Filing Season Program cannot represent clients before the IRS for audits or appeals.

What is the earned income tax credit?

The Earned Income Tax Credit (EITC or EIC) is for low- to moderate-income individuals and families. It lowers the amount of tax owed, and, in some cases, even allows for a refund.

To qualify, applicants must file a return, even if they’re not required to do so. A person must either meet additional requirements for workers without a child or be a parent to a child that is qualified.

Help! The IRS is doing an EITC audit on me as a tax preparer!

EITC Qualifications are delineated in Publication 5334, which, bluntly speaking, is complicated. Those who do fall within the parameters enjoy tax breaks and sometimes even a refund.

EITC audits are when the IRS inspects the tax returns of EITC claimants or their tax return preparers. Yes, even the tax return preparers can be held liable for penalties – or even worse – for misstating EITC claims. If you claimed EITC on your client’s tax returns and are now being audited by the IRS, we can help.

Enlisting the help of a tax attorney will make the process less stressful. Plus, you’ll likely secure the best outcome by working with someone who’s navigated the process on countless occasions.

Paid preparer due diligence penalties

If a paid preparer does not comply with due diligence requirements mandated by the IRS to confirm the taxpayer’s eligibility for EITC a penalty may apply. Historically, the penalty for each failure to meet due diligence requirements was $500 per occurrence, but for tax year 2019 the penalty increases to $530.