IRS Cautions Preparers about Schedule C Mistakes
Tax preparers have been warned through the letters mailed by the Internal Revenue Service about the potential mistakes identified by IRS on Schedule C which is filed for the sole traders. These letters are the follow-up warning letters IRS previously sent in December 2013.
The director of IRS’s Return Preparer Office, Carol Campbell has signed the letter and said that the tax returns prepared by the agents have been reviewed by the agency and it is found that a large number of traits prevail with the tax preparers which usually lead to mistakes on the P&L of sole trader, Form 1040 and Schedule C.
She added that this letter recalls your duties in this respect and also gives educational help. While getting paid for the preparation of tax returns, you have a responsibility to ascertain that the returns of your clients are correct. In addition you are requested to pay special heed in this respect in upcoming season.
The warning letter also recalls you about taking the necessary steps in order to make correct tax returns for their clients. This also includes reviewing the returns to ensure the relevance of applicable laws and regulations and that the credits, expenses, deductions and income are reasonable.
Campbell indicated that generally you can trust on the financial information provided by your clients without verifying that, but the implication of information you are having cannot be ignored. You have a duty to undertake enquiries if you see the financial information provided to be inconsistent, incomplete or incorrect.
Campbell stated that, in the future, we shall look for the improvements in tax returns prepared by you.
She added that the incorrect tax returns could lead to the interest charges, fines and extra taxes. A fine of at least $1,000 per return will be imposed on the preparers for an understatement found in the tax returns of their clients due to unreasonable position. And for intentional understatement or preparers’ irresponsible behavior towards laws and regulations, they will be charged a minimum fine of $5,000 for one return.