Why Is My Tax Preparer Asking Me Such Nosy Questions?

January 7, 2014 by Jan Roberg · 2 Comments
Filed under: Earned Income Credit 

Photo by Asterios Marias at Flickr.com

 

I took a phone call from a fellow awhile back who was absolutely furious about some of the questions his tax preparer had asked him.  The preparer had asked a whole bunch of questions about his kids and even asked to see their report card from school.  He said, “My daughters are 4 and 2 years old.  They don’t even go to school yet!”

 

So what’s going on here?

 

It’s all related to an IRS form—# 8867.  Form 8867 has to be filled out and sent in with every tax return that has the Earned Income Tax Credit.  Now, this form has been around for awhile, but it used to be that a tax preparer was just supposed to ask some questions and you’d keep that information to yourself.  Now, the IRS expects you to send the form in with the tax return.  If a tax preparer doesn’t complete the form and send it in with an EIC return—the IRS charges a $500 penalty to the tax preparer.

 

 

That’s $500 per return.  You miss too many of those and you could be out of business.    For most preparers, that’s more than what we charge to prepare an EIC return.

 

Now if you prepare your own tax return, you don’t have to worry about form 8867, it’s only for paid tax preparers.  But if you have your taxes done at H&R Block, or Jackson Hewitt, or even me—that form must be completed, and signed, and sent with your tax return.  (If your tax return is e-filed, we are required to keep the signed copy in our files.)

 

And the form seems to ask for more and more information every year.  Now there’s a whole section about documents:  documents to prove your kids live with you, documents to prove a disability, and documents to prove self-employment income.   Tax preparers are now expected to look at a taxpayer’s documents to verify the information on an EIC tax return.  School records, like report cards, are usually the easiest thing to use for documentation.  Of course, report cards aren’t very helpful when your children aren’t in school yet.  No documents, no form 8867.  No form 8867, no tax return.  No tax return, no refund.

 

It’s like the IRS is trying to turn regular tax preparers into the EIC police.  It’s not a job we asked for, but it’s a regulation that we’re required to enforce.  The penalties are so stiff that we’ll all be out of work if we don’t go along.

 

So remember, if you tax preparer asks to see your child’s report card, he doesn’t care if your son got a D in math or is a straight A student;  he’s just trying to help you get your refund.

What’s New with the Earned Income Tax Credit? You Need to Know This

November 27, 2012 by Jan Roberg · Leave a Comment
Filed under: Tax Credits 


If you usually claim the Earned Income Tax Credit (EIC) then you need to know about the new rules.  Although the dollar amounts of the EIC have remained the same, the reporting requirements have changed dramatically.  If you have your taxes done by a professional—then you need to be prepared for the additional paperwork.

 

So what’s different?  It’s the new page 4 of Form 8867—Paid Preparer’s Earned Income Credit Checklist (http://www.irs.gov/pub/irs-pdf/f8867.pdf).  That’s the form that tax preparers have to fill out and send in along with your tax return.  The quick and dirty summary is:  if a tax preparer doesn’t ask enough questions and fails to get enough information before submitting your EIC tax return, she’ll be subject to a $500 fine.  Ouch.  That’s $500 per tax return.  A few bad tax returns can put your tax preparer out of business.

 

So what’s on this page 4?  Well the first item is proving that the child you’re claiming EIC for really lives with you.  Here’s what you can use to prove your child lives with you:

 

  • School records or statement
  • Landlord or property management statement
  • Health care provider statement
  • Medical records
  • Child care provider records
  • Placement agency statement
  • Social service records or statement
  • Place of worship statement
  • Indian tribal official statement
  • Employer statement

 

You don’t need to have all of these things, but you’ll need at least one thing to show your child lives in your house.  The school records are probably the easiest if your child is of school age.   For me, as a tax preparer, I would accept your child’s last semester report card as evidence of residency as long as the report card has your home address on it.

 

If you are claiming a disabled child, you’ll need to prove the disability.  Here are the documents for that:

 

  • Doctor statement
  • Other health care provider statement
  • Social services agency or program statement

 

So with a disability, you have a double issue—proving residence and the disability.  Although to be quite honest, I suspect that these statements would also include a home address on them and serve a duel purpose.

 

And if you’re self-employed, you’re going to need to prove you really have some sort of business with the following records:

 

  • Business license
  • 1099MISC forms
  • Records of gross receipts
  • Income summary
  • Expense summary
  • Bank statements

 

These records are pretty standard for anyone who is self employed anyway so this shouldn’t be a burden.   Bottom line here is—if you have a business, you need to run it like a business and keep proper business records.

 

In addition to the new paperwork requirements, of course you’re still going to have to show you and your children’s social security cards.  Also, if you’re getting a bank product (where you pay for your tax preparation out of your refund) you’ll need to have a driver’s license or state ID card with your correct current address on it.

 

The IRS has already announced that people can expect their refunds to be delayed this year.  For the fastest possible refund, you want to make sure that you’ve got all of your paperwork together before you even head to the tax office.

 

Be sure to check out http://www.eitc.irs.gov/central/main/ to answer any EITC questions you may have.  Or call us and we would love to help.

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