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It’s Officially Tax Season — Here’s An Earned Income Credit Checklist
Posted By Joseph S. Reisman On January 24, 2013 @ 1:00 pm In News & Features | 2 Comments
Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.
In 2009, more than 26 million people received nearly $59 billion in earned income credits. Nice, right? Now, what if I told you that around 33 percent of the $59 billion distributed was fraudulent?
Due to this, the IRS is requiring tax preparers to verify, much more closely, that you are eligible for this credit. The tax preparer is subject to a penalty of $500 for each incorrectly prepared return; you are subject to governmental correspondence, and migraines, as well as having to return the money with interest and penalty, as well as not being able to claim the credit in the future.
In the past you had to just say “yes” or “no” to various questions. For example:
Then there were some questions, again “yes” or “no,” about your child:
The IRS relied upon the tax preparer to perform “due diligence,” and a few other hoops. This included signing a statement that the preparer “must not know or have reason to know that any information used to determine the taxpayer’s eligibility for, and the amount of, the EIC is incorrect.”
Additional Requirements For This Year
The preparer will ask you for some of the following records concerning your dependent:
The preparer has to have proof of the documents that were relied upon to allow you the credit.
Are you self-employed, like a babysitter? You will have to prove your income:
The EIC program, unlike other programs, has no controls, which is why the IRS is focusing on preparers to control the fraud. (As an aside, this program is one of the main reasons that close to half of Americans pay absolutely no income tax.) And this is probably why your tax preparation fee is going to increase this year, and why, if you claim this credit, your refund will be delayed this year.
Have a good week.
Quip: Why don’t accountants count sheep to get to sleep?
Because if they lose count it would take three hours to find the error.
Joseph Reisman, of Joseph S. Reisman & Associates, has been serving tax prep and business accounting expertise from his Coney Island Avenue office for more than 25 years. Check out the firm’s website.
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