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2009 Representation Update

2009 Representation Update

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Publicado porMcKenzieLaw
This article by attorney Robert E. McKenzie provides highlights of IRS procedures including collection, exam and special programs.
This article by attorney Robert E. McKenzie provides highlights of IRS procedures including collection, exam and special programs.

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Published by: McKenzieLaw on Feb 26, 2010
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3.230The IRS continues to expand and enhance its abusive preparer program. The
program was developed to enhance compliance in the return-preparer community by
engaging in enforcement actions and/or asserting appropriate civil penalties against
unscrupulous or incompetent return preparers. Bad preparers are a significant problem
for both the IRS and taxpayers.

Return preparer fraud generally involves the preparation and filing of false income tax
returns by preparers who claim inflated personal or business expenses, false
deductions, unallowable credits or excessive exemptions on returns prepared for their
clients. This includes inflated requests for the special one-time refund of the long-
distance telephone tax. Preparers may also manipulate income figures to obtain tax
credits, such as the Earned Income Tax Credit, fraudulently.

In some situations, the client (taxpayer) may not have knowledge of the false expenses,
deductions, exemptions and/or credits shown on their tax returns. However, when the
IRS detects the false return, the taxpayer — not the return preparer — must pay the
additional taxes and interest and may be subject to penalties.

Abusive Preparer Prosecutions

FY 2008

FY 2007

FY 2006

Investigations Initiated

214

218

197

Prosecution Recommendations

134

196

153

Indictments/Informations

142

131

135

Sentenced

124

123

109

Incarceration Rate*

81.5%

81.3%

89.0%

Avg. Months to Serve

18

19

18

Audits of 30 Clients
3.240
Another aspect of the IRS preparer program is identifying suspect preparers and
audited their clients. If during an examination a revenue suspects that some of the
deficiencies on a return were caused by the preparer she can refer the matter to an
area coordinator. After review the coordinator can initiate a project on the preparer. The
preparer is sent a letter notifying her that she has been selected for a project and 30 of
her client's returns are audited. If significant deficiencies are found then the IRS may
choose one of several courses of action including:

•Referral to Criminal investigation
•Referral to the office of professional liability
•Preparer penalties
•Referral to Department of justice to seek an injunction ordering the preparer to
cease filing tax returns.

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