Top 5 IRS Enforcement Priorities For 2012

Every year, the IRS rolls out new initiatives to make sure everybody is complying with the tax laws. While certain things, such as frivolous tax arguments, are always enforced, the IRS shuffles personnel around to enforce compliance with certain parts of the tax code based on the trends they identify. Five of those trends are discussed here.

1. Foreign accounts and assets. If you have money or assets overseas, the IRS wants to know about it. If you have more than $10,000 in a foreign bank account, you’re required to file an annual disclosure statement with the Treasury Department. In addition, the IRS is now requiring foreign banks to enter into information sharing agreements, or else have 30% of payments transferred to them from the U.S. withheld to pay potential tax bills. The failure to disclose your overseas assets can result in significant penalties, and potentially criminal prosecution.

2. Payroll taxes. The single biggest emphasis of enforcement within the employment tax arena has to do with taxpayers that pyramid their employment tax liabilities, meaning that they owe money, and continue to accrue new liabilities each quarter. The IRS is also heavily targeting the owners of S-corporations that don’t pay corporate officers a fair wage (and thus payroll taxes), but rather take nothing but distributions, which are not subject to payroll taxes.

3. Gift tax audits. Many people don’t realize that giving cash gifts to their friends and family can have tax consequences. Every person has a lifetime cumulative exemption from gift taxes, and there are also annual limits. The IRS has started to electronically examine property transfers based on public records in order to ferret out people that may owe gift taxes.

4. Automated Substitute for Return Program. Section 6020(b) of the Internal Revenue Code allows the IRS to file a tax return for you if you fail to do so. They prepare this Substitute for Return (SFR) based on information they have on file, such as W-2 and 1099 information sent to the IRS by your employer. A computerized system now prepares these returns, and the IRS has asked Congress for the past several sessions to make it a felony when you fail to file a tax return for three out of five straight years and the tax exceeds $50,000. Fortunately, this has never been passed into law, but it is a law that the IRS will likely continue asking for.

5. Schedule C Continue reading

Remembering To Do Marketing During Tax Season

When it’s the middle of tax season, and you’re buried under a mountain of returns, it’s often difficult to think about doing marketing of any sort in order to get new clients.

As a tax professional, your day right now probably looks a lot like mine: A full day of new tax returns that need to be done. Most days, I have appointments on the hour, every hour, for the entire work day, plus an entire stack of work that takes into the evening to complete.

Because of this, it’s difficult for me to stop and “practice what I preach”. Fortunately, I have built highly automated systems and have a very short list of marketing items that I have to perform daily.

To generate the day’s mailing list for postcards takes literally a push of a button, and then uploading of that list to and sending out that day’s mailing takes only a few more clicks, and it’s done.

Similarly, to generate another set of personal introduction letters to new prospects that I mail out daily, I click one link in my CRM system, and it generates a mail merged PDF with all the letters for that day. It’s usually only 10 to 20 new letters, which I then sign and have my assistant hand address and stamp.

My total time commitment for my daily client marketing: About 5 minutes.

That right there is the power of having systems and checklists, to get done the things that need to get each and every day, but doing them quickly and efficiently without sacrificing quality.

What are you doing on a daily or weekly basis, even during tax season, to ensure that you have a steady stream of business even after tax season? Leave a comment below to share how you’re doing it, and read the other comments to see what other people are doing.… Continue reading

Tax Return Preparation Daily Client Checklist

If you’ve been doing tax returns for very long, you may find the thought of having a checklist to do them to be somewhat ridiculous, especially if your tax software has a good “interview” mode that you use and rely on.

In reality, this checklist has more to do with everything BUT the tax return. If you are running a busy tax preparation office during the height of tax season, having an organized and efficient way to handle the large numbers of people coming through your office quickly becomes vital, and if you don’t have a swarm of people coming through at tax season, then you owe it to yourself to take a look at your filing season marketing plan.

This checklist really covers what to do with clients when they walk through the door until they depart with a completed return in hand. If you operate your practice as a drop-off service, then you will need to modify this slightly. This checklist is based on a new client coming in for whom you have never prepared a 1040 in the past.

Tax Return Preparation Client Checklist

  1. Ensure that client is properly greeted and provided Client Information Sheet to complete.
  2. Create client folders, set up in computer system.
  3. Review Client Information Sheet, asking questions regarding anything that comes up off that sheet.
  4. Inquire about items NOT marked on Client Info Sheet, but which are common tax items (deductions, credits, allowances, dependents, etc).
  5. Make necessary copies of client documents.
  6. Enter client data and complete the return.
  7. Review refund/payment options, as applicable.
  8. Review bank product options, as applicable.
  9. Obtain all necessary signatures.
  10. Provide client with return copy.
  11. E-file return.
  12. File documents as necessary for storage requirements.

Daily Items

  1. Process e-file rejections. Contact clients regarding these, as necessary.
  2. Print checks and distribute to clients, if applicable (for bank products).
  3. Confirm appointments, as applicable.

As you can see, there are groups of items to do daily, and also items to complete on each and every client.

Again, it may seem ridiculous to you to have a set of checklists for completing these actions, since you are likely used to doing them anyway. However, by having a procedure that is adapted to how you run your tax practice, and reviewing it regularly, you can operate your practice more efficiently and ensure that other preparers whom you supervise are all on the same page.… Continue reading