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

The New Year is upon us once again. That means the income tax season has begun and important tax documents should be arriving in the mail. Even though your tax return isn’t due until April 2011, why not begin the year off right and start filing your tax return early. Here are the top tax tips for 2011.

1. Gather all your tax related documents Pull together the documents and forms you’ll need when filing your taxes. You’ll need W-2 forms, 1098 forms to document the interest you pay on your mortgage, receipts for your charitable donations, documentation of property taxes you pay, trade information to calculate taxes due on capital gains and dividends, canceled checks, and other documents related to income or deductions you’re claiming on your return. Organizing your tax paperwork is definitely the top tax tip for 2011.
2. Keep an eye on the mail W-2s and 1099s will be coming soon; you must have these to file your tax return. Another great tax tip is to know that your tax documents come from different sources: employers provide W-2s, financial institutions send tax documents related to interest, dividends, broker transactions and retirement plans, lenders provide the tax data for mortgage interest and real estate transactions, and taxing authorities cover property tax and income-tax refunds.
3. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available exclusively at http://www.irs.gov. There is an option to prepare your tax return and e-file it for free for tax season 2011.
4. Try IRS e-file IRS e-file is the most common way to file a tax return. Starting in the 2011 tax year, many tax preparers will be required to use e-file and will explain your filing options to you. Combine e-file with direct deposit and you can get your tax refund in as few as 10 days.
5. Consider other tax filing options You can prepare it yourself or have a tax preparer file your tax return. You may even be eligible for free face-to-face help with an IRS office or tax volunteer. If you have outstanding tax issues or owe back taxes, consider visiting a tax attorney before preparing your tax return.
6. Direct Deposit Get your tax refund deposited directly into you bank account. It’s faster and safer than waiting for a check from your postman.
7. Double check your return Believe it or not, the most common tax return errors are the Social Security Number and math calculations. Take your time and double check everything. Mistakes will slow down the processing of your tax return and may even increase your chance of being audited.

Following these top tax tips will make your 2011 tax season the smoothest ever.

source: irs.gov

Be careful of tax  preparers who claim they can get their customers “instant” federal income tax refunds.  They may not be giving their clients all the money they’re owed.

Some accountants offer “refund anticipation loans” as a “rapid” way to give customers tax refunds, but according to the New York City Department of Consumer Affairs, such loans are a fast way to lose money.

“Between the fees and interest rates that are charged for these refund loans, we’ve seen costs as high as a 500-percent rate when you take a look at what’s being borrowed,” says  NYC Consumer Affairs Commissioner Jonathan Mintz.

The loans are advertised as “fast” or “instant” refunds, but they’re really high-interest loans that lure people who do not want to wait the standard eight days to receive their refund from the Internal Revenue Service.

On Tuesday, DCA officials denounced such loans while announcing the results of a month-long citywide crackdown on over 800 income tax preparers.

“Three out of 10 preparers were misleading their customers about their rights and in most cases were telling them that a refund loan was somehow just a ‘rapid’ refund or a ’same day’ refund, and that kind of advertising is deceptive and illegal,” says Mintz.

The Bronx is the borough with the most offenders, with a 50-percent non-compliance rate.

“We issued over 2,000 violations to preparers across this sweep. Those violations which could total up to a million dollars in fines,” says Mintz.

However, the number of compliant tax preparers has increased from last year.

To protect yourself when purchasing tax preparation services, the DCA offers the following tips:

• Avoid “instant,” “rapid,” “same day” or “fast cash” refunds. They’re actually loans with extremely high interest rates.

• Know your rights. Tax preparers must post their qualifications, fees and charges and must give a consumer bill of rights. They must sign every tax return and provide you with a copy of your return and a receipt.

• Protect yourself. Tax preparers may not charge you fees based on the amount of taxes you owe.

• Never sign a return that is blank, incomplete or filled out in pencil.

• Do not pay cash.

Protect yourself and your federal income tax refund by choosing a reputable tax preparer.  If you’re having trouble finding a good tax preparer, ask a family member or a friend.  Advice from a trusted source should put your worries at ease.

source:  ny1.com