The Internal Revenue Service is going after tax return preparers who prepared returns in 2011 but failed to comply with the new federal tax preparer registration program.

Last year, the IRS initiated the Preparer Tax Identification Registration program to oversee the tax return preparation industry and regulate the conduct of tax return preparers. The program requires all paid tax return preparers to obtain a Preparer Tax Identification Number (PTIN). Preparers will be required to sign their names and include their PTINS on the returns and refund claims they prepare.

Earlier this month, the IRS began sending letters to approximately 100,000 income tax return preparers who failed to comply with the new IRS mandate.  The IRS notices explain the program, how to register for, or renew a PTIN, and where to get assistance.

“The vast majority of federal tax return preparers complied with the rules. Obviously, some preparers did not get the word, so these letters provide additional information so they can register as soon as possible,” said IRS Commissioner Doug Shulman. “We owe it to the compliant tax preparers to make sure that everyone is on a level playing field.”

Since last fall, over 700,000 tax preparers have registered and obtained PTINs. Paid preparers who are not tax attorneys, Certified Public Accountants or Enrolled Agents are required to pass a competency exam and suitability check, and complete  15 hours of continuing education credits annually.

Some unscrupulous preparers may attempt to elude the new oversight program by not signing returns they prepare. Taxpayers should never use tax return preparers who refuse to sign returns and enter PTINs.

In an effort to identify these “ghost preparers,” the IRS later this year also will send letters to taxpayers who appear to have had assistance with their returns but lack tax return preparer signatures. The letter will inform taxpayers how to file a complaint against preparers who failed to sign returns and explain how to choose legitimate tax preparers. The goal of the letters is to protect taxpayers by ensuring that all paid federal tax return preparers are registered with the IRS, and sign tax returns they prepare and use an identifying number when required to do so.

Compliance is a central part of the new tax return preparer initiative and the letters are one step in an ongoing compliance effort to ensure tax return preparers are following the new regulations. The IRS also is working to identify tax return preparers who make repeated errors and IRS personnel have had face-to-face meetings with thousands of these tax return preparers over the past two years.

The IRS and taxpayers who use paid tax preparers will benefit from this initiative. Visit the IRS website for more info on the PTINs program.

source: irs.gov

Good news for the wealthy, the estate tax has been set at 35 percent as part of the Bush tax cut extension signed off by President Obama on Friday.

The estate tax extension allows estates of $5 million per person and $10 million per couple to pass to heirs tax-free through 2012. Amounts over $5 million and $10 million would be taxed at the 35% tax rate.

Democrats were infuriated at the level at which the estate tax was set in the measure. So much so, that VP Biden made clear that the administration would oppose the extension of the 35 percent estate tax rate beyond 2012, even in an election year.

The wealthy and retired folks are the real winners. The estate tax is a bonanza – the exemption limit rises to $5 million per person (it was set to decrease to $1 million as of January 1) and the tax rate will drop to 35 percent from the 55 percent that would have occurred on New Year’s Day.

Estate tax attorneys are the losers. There aren’t many estates that are valued over $5 million.

source: cbs.com

Its unfortunate that many taxpayers who owe federal income tax or have tax problems avoid consulting with a tax attorney. When you have a legal problem - you see a lawyer and when you’re sick - you see a doctor. So why is that many of you would rather stick your head in the sand and wait for the IRS to knock on their door than to consult with a tax attorney?

I guess one of the reasons is you’re not aware of the benefits of a tax attorney; maybe it’s because you feel it will cost you a fortune or maybe you just don’t know that a tax attorney is your best ally against the IRS.

Regardles of the reason you have avoided consulting a tax attorney, its time to change and seek tax help. Tax attorneys are schooled in knowing U.S. tax laws, representing you in IRS cases, providing you your legal options, help you restructure your finances to alleviate future tax debts. Perhaps the biggest benefit you can get from consulting a tax attorney is peace of mind.

What you need to understand about a consultation with a tax lawyer is that it is just a consultation. You are not obligated to hire the professional. Tax attorneys work like other lawyers, you pay for a consultation and go from there.

If you owe back taxes or haven’t filed federal income tax statements, the worst thing you can do is to continue to avoid them. It will cost you in the long run. In fact, it could cost you more than money, in extreme cases it could cost you time in jail.