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This is the last “issue” of THE TAX PROFESSIONAL in the format of a monthly newsletter.

I will be on hiatus during the tax filing season. THE TAX PROFESSIONAL will return in a

“blog-like” weekly format in May.


In my article “Won’t You Take This Advice I Hand You Like A Brother” in the Winter 2014 issue of NJ TAXING TIMES, the quarterly newsletter of the NJ chapter of the National Association of Tax Professionals, I advise newcomers to the tax preparation business to –

“(R)emember that . . . the Tax Code is humungous, and you cannot be an expert in all Sections.

Choose the area of tax practice that you enjoy most and are best at and limit your practice to that area

And -

“Be willing to say no to a new, or even an existing, client who has a special tax situation that you are not educated or experienced in, and do not want to become educated or experienced in.”

I also quote my quote from the TAXPRO TODAY article “Knock on Would”, suggesting that if I were starting out in business today –

“I would also not accept clients with certain specialized 1040 issues – I would avoid DPAD, FBAR, and other more complex areas. And, because of the relatively new excessive ‘due dilligence’ requirements, I would not accept 1040 clients with Earned Income Credit claims.”

I suppose this could be considered “controversial” advice – especially the part about refusing to prepare returns with EITC claims. However it appears that I may not be alone in this thinking.

In “Filing Season 2015: Observations and Predictions” at FORBES.COM Claudia Hill clearly has the Earned Income Credit in mind when she observes –

“U.S. tax preparers find themselves questioning the risk/reward aspects of working with lower-income taxpayers in response to continual incursions by IRS and Congress to micro-manage due diligence requirements and threaten preparers with penalties for making errors based on interpreting taxpayer-provided information.”

She also echoes my thoughts on keeping away from FBAR –

“The overly complex and burdensome aspects of working with taxpayers with foreign investments may cause some preparers to choose not to do so.”

When a client “engages” a tax professional to prepare his/her individual income tax returns he/she is basically asking for assistance in preparing a government report. In approaching the preparation of tax returns I assume that, unless I have direct personal knowledge to the contrary, the client is telling me the truth.

While the Internal Revenue Service considers the tax preparation community as a “stakeholder”, as a tax preparer I am not in any way a representative or agent of the Internal Revenue Service or any state tax authority.

My only obligations and responsibilities to the IRS or a state are to report all taxable income and claim all allowable deductions and credits, as identified in the Internal Revenue Code, of which I have knowledge, in a manner that is prescribed or allowed by the Tax Code or IRS and state rules and regulations – basically to prepare an accurate and honest return - and to comply with the standards required of all tax preparers, unenrolled and otherwise, outlined in IRS Publication 470 and IRS Circular 230.

I must prepare an honest and accurate return, based on the information provided. I must not knowingly prepare a fraudulent return.

As a paid tax professional I sign each return that I prepare declaring, under penalty of perjury, that the return is “based on all information of which preparer has any knowledge”.

It is my obligation and responsibility to tell clients about the IRS standards and requirements for documenting income, deductions and credits. But that is where it ends. I do not need to see each and every piece of documentation.

I am not obligated or required to personally verify all numbers entered on the 1040 (or 1040A). I am required to do what is called “due diligence” when it comes to information provided by the client. What this means is that I must –

• evaluate information received from clients,

• apply a consistency and reasonableness standard to the information, and

• ask additional questions if the information appears incorrect, inconsistent or incomplete.

A tax preparer should not be forced to become a “Social Worker” and verify, through investigation, that a taxpayer qualifies for federal welfare. The excessive due diligence requirements for EITC claims foisted upon tax preparers is not a fair burden. And tax preparers have a perfect right to “just say no” to preparing returns with EITC claims, or any other item that required unnecessary additional work.

Claudia also says about the Affordable Care Act (ACA) -

“Provisions affecting lower and middle-income taxpayers cause confusion for those taxpayers not covered by medical insurance under employer plans or Medicare. Probably most frustrating about these provisions is that the complexity of the law is showered on those least likely to have the means to pay for competent tax assistance.”

This also applies to the Earned Income Credit.

Taxpayers who cannot afford to pay for health insurance and truly need the Earned Income Credit are forced to pay higher fees to tax preparers because of the increased complexity and due diligence requirements of the ACA penalty and applying for the EITC. In the case of the ACA taxpayers must pay a preparer to charge them a penalty, and with the EITC taxpayers must pay a preparer to apply for federal welfare.

The Earned Income Credit, or any refundable credit, the ACA shared responsibility penalty, and many other government benefit related deductions and credits do not belong in the US Tax Code!

I strongly recommend that tax preparers be selective in the clients and types of returns they accept, and learn how to say “no”.


NATP recently “tweeted” as a plug for its upcoming webinar -

“With ACA, your due diligence requirements for completing the taxpayer’s tax return has increased substantially.”

And the January 2015 issue of ACCOUNTING TODAY says –

“Industry sources agree that one of the biggest concerns is due diligence. In other words, how do preparers verify that their client does, in fact, have {health insurance} coverage?”

What increased due diligence?

And I do not have to verify that a client has health insurance coverage. I simply ask the client and he

or she tells me yes or no.

If they tell me yes I do not need to do anything more. Unless I have independent personal knowledge or information to the contrary I assume he or she has told me the truth. To repeat I do not need to “verify” via independent documentation that the client does, in fact, actually have coverage.

If I ask a new client, “Are you married?”, and he or she says yes I do not ask to see the marriage certificate and wedding album. I may ask if they were legally married on the last day of the tax year for

the return I am preparing, and if the two spouses lived together for the entire year – but that is it.

And if a client tells me he or she has a dependent child or children I do not ask to see the birth certificate(s). I simply ask for the date(s) of birth and Social Security number(s).

So if I client tells me he or she had health insurance coverage for all of 2014 that is all I need to check

the box on Line 61. I do not need to see his monthly premium invoices, or get a “certificate of insurance”

from his provider.

Again I ask, what additional due diligence? There is no EITC-like excessive due diligence required for the ACA individual responsibility requirements.

In most cases I will know if a client had full-year insurance coverage without even asking the question – based on the forms, returns and information he normally gives me every year.

For employees I can usually tell if they had insurance coverage from the W-2 or final pay stub.

Many of my clients are receiving Social Security or Railroad Retirement. Medicare withholding is

reported on the SSA-1099 and RRB-1099 they receive.

Self-employed clients can deduct their health insurance premiums as an Adjustment to Income,

and tell me the cost of their premiums on the worksheets they provide me for self-employment

income and expenses.

Most of my 1040 clients are NJ residents. NJ residents can deduct medical expenses, including health insurance premiums that are treated as “pre-tax” for federal purposes, and include the cost of their insurance on the Medical Expense Worksheet I provide.

Determining if a client has health insurance coverage is not going to be a big problem, at least for me.

And in future years aren’t all individuals covered by health insurance going to receive either a 1095-A, 1095-B, or 1095-C, assuming all employers and all insurance companies properly complete and issue these forms.

If I do have clients without coverage it is probably because they could not afford the insurance,

and will be excluded from the penalty under the 8% of household income exception.

So what is the big deal? What is the “big concern”?


. . . I want to make this special offer one more time.

Over the years I have developed a collection of forms, schedules, and worksheets that have proven very helpful in my practice. I have gathered these forms in a special compilation for fellow tax professionals to use in your practice during the tax season.

Some of my “homemade” forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to returns.

I also include a collection of client memos in the compilation package.

This package will be sent as a “word document” email attachment, so you may edit and revise them as you see fit to personalize them to your firm, customize them be more relevant to your particular practice, clients or specific professions, or update for annual COLAs or tax law changes.

Please be aware that this is copyrighted material and is for your internal use only.

The price for this compilation is $7.95. But for orders postmarked in January I will offer a 25% discount and let you have the package for only $5.95!

Click here for more information on this compilation and how to order. When ordering your package mention you read about the offer here at THE TAX PROFESSIONAL.


The NJ chapter of NATP will be offering a half-day seminar on the Affordable Care Ace on Thursday, January 22, 2015, from 8:00 AM to 12:00 noon (registration begins at 7:30 AM) at the Hotel Woodbridge Metropark.

The seminar, taught by Enrolled Agent John Sheehy of Tax Practice Pro Inc, will cover the mandates which require everyone to comply with ACA, the Premium Tax Credit calculation, how to obtain coverage in the Marketplace and its Exchanges, and the tax professional’s role in the ACA.

The cost is $90 for a NATP Member ($125 after 1/16/15) and $125 for a non-member ($150 after 1/16/15). I expect a buffet breakfast is included.

Click here for the flyer and registration form.

The New Jersey Chapter of NATP has a continuing program collecting Box Tops for Education ( and Labels for Education ( for the Midland School in North Branch, NJ ( If you are attending a NJ-NATP seminar please bring your stash of box tops and labels.


+ I came across this on the NY state webpage for tax preparer CPE.

All commercial tax return preparers must pass a competency exam by December 31, 2017. More information about the exam will be available in March 2015.”

I was reminded by a fellow NATP member that CPAs and attorneys are not included within the definition of a commercial return preparer. Accordingly, they will not be required to pass the exam, and they

are also exempt from registering with DTF.

NY has also created a searchable database of “compliant tax preparers”, “which the state will encourage all taxpayers to use in order to ensure that any tax professionals they hire are compliant with the new regulations”. I found my name on the list. This is the NY state version of the database that the IRS promises to create with EAs, CPAs, attorneys, and those who volunteer for its AFSP.

+ If you still haven’t joined NATP yet here is another reason to do so - a new recently added member benefit -

“We understand that not every tax question needs a discussion with one of our tax research specialists, but sometimes it’s nice to review a topic to confirm that you’re making the right call on a return. Our new Do-It-Yourself (DIY) Research tool will quickly become a valuable resource to you.

Do-It-Yourself Research is a huge searchable database of our most common questions, followed by answers and citations of code sections, revenue rulings and court cases. Best of all, it’s completely free with your membership along with your yearly free call to our research team.”

If you would like to receive NATP membership information please email me at [email protected] with “NATP Membership” in the “subject line”.

+ CCH has published several new “Tax Briefings” – “Final Repair/Capitalization/MACRS Regulations Update”, “Tax Increase Prevention Act of 2014/ABLE Act/Omnibus Funding Agreement”, and “2014 Tax Year-In-Review”.

+ The IRS has announced the dates and locations of the 2015 Nationwide Tax Forums –

National Harbor MD = July 7-9, 2015

Denver CO = July 28-30, 2015

San Diego CA = August 11-13, 2015

Atlanta GA = August 25-27, 2015

Orlando FL = September 1-3, 2015