Enrolled Agent Help for Taxpayer Mistakes on a Tax Return
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by: No more debt !
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Date: Sun, 19 Jun 2011 Time: 7:56 AM
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Mistakes on tax returns will eventually occur. Identifying the corrective action depends upon the type of mistake. By passing the enrolled agent examination, you possess an especially high level of expertise that tends to limit mistakes involving tax law interpretation. But you can still punch the wrong key or commit a mathematical error.
Fortunately, incorrect math is identified by the IRS when processing a tax return. There's no need for taxpayers to send amend returns in such instances. However, they will normally rely upon you when receiving an IRS notice of proposed change to the return. This usually involves identifying the error and sending a response of agreement to the IRS.
You might have to extend additional effort when the error involves unreported income. This can happen when taxpayers inadvertently failed to provide you with income that the payment source reported to the IRS. A taxpayer might be unclear about the tax impact of some situations. These are occasions to deploy your training from an enrolled agent ethics course. Taxpayers need to learn from you about reporting taxable income from such unusual situations as awards and barter.
Occasionally, you may have to utilize some of your CPE course training to amend a tax return. These cases occur when a taxpayer realizes that additional income is missing from the original filing. You will often have to prepare a new schedule to report previously omitted income.
Amending a tax return can also become necessary even when an IRS notice is sent about unreported income. The taxpayer is allowed to amend a tax return to report the missing income identified by the IRS plus include any allowable deductions related to that income, which are unknown to the IRS. Because of this possibility, you should promote your enrolled agent tax practice as the ideal stop for anyone with a tax notice.
An example of this is someone with a portion of income reported on a Form 1099 as an independent contractor. You can help this taxpayer deduct ordinary and necessary expenses incurred to earn that income. Another common situation involves securities sales. An amended tax return is required with a Schedule D subtracting the cost basis from the sale proceeds to determine the taxable gain.
You can assure taxpayers about your ability to make these amendments because of your training from enrolled agent CPE. Amending tax returns is often an opportunity to capture clients for your tax practice who previously self-prepared their returns. After resolving their mistakes on a prior tax return, you earn their trust in your expertise to prepare future tax returns correctly.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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