October 22, 2019
Robert T. Hedrick, EA, MST
As a part of its Preparer Compliance Program, the IRS conducts Knock and Talk Visits to “help preparers understand and avoid errors” in claiming refundable credits and the head of household (HOH) filing status on Form 1040s. “A revenue agent and criminal investigator or IRS agents on their own” visit select preparers who, in the opinion of the IRS, previously prepared such “claims with a high chance of error.” The visits are described as “outreach and education visits” where the IRA reps talk about past errors, offers suggestions for improving accuracy, answers questions, and explains the consequences for not improving claims involving refundable credits and the HOH filing status.
According to the IRS website, penalties do not result from these visits, but the IRS will continue to monitor these preparers. “If a preparer’s refundable credit and HOH filing status claims do not show improvement, we [IRS] may conduct a due diligence audit, during the next filing season.”
Many tax preparation professionals feel that such audits are to be avoided, as there’s a potential for huge penalties, of $520 (for claims on 2018 returns), per credit, per return for unmet due diligence requirements in the 25 returns that will be reviewed by the IRS, in a due diligence audit. Worth noting is that, during the tax season the IRS “may conduct due diligence audits without advanced notice….” That means showing up unannounced during the tax filing season. The IRS does promise to contact preparers to schedule such audits prior to the income tax filing season.
Should IRS agents visit, it is absolutely critical that their credentials be validated. According to the IRS website, they are supposed to “always provide two forms of official credentials called the pocket commission and HSPD-12 card.” (What the IRS calls the HS PD-12 card is also called the PIV credential and includes a photo, agency identification, etc. The pocket commission includes the badge and indicates whether this is an enforcement credential or not.)
For what it’s worth, a genuine IRS representative will also provide, upon request, the phone number for verifying information and confirming his or her identity. However, this phone number is apparently not independently available on the IRS website. Of course, the legitimacy of any phone number provided by an unverified person claiming to be from the IRS must be regarded as suspect until the person’s identity and relationship to the IRS can be authenticated.
Disclaimer: This article is designed to provide information in regard to the subject matter and has been prepared with the understanding that neither the Illinois CPA Society nor the author of this article is providing accounting, tax or legal advice or is performing any legal, accounting or other professional service. If accounting, tax or legal advice or other expert assistance is required, the services of a competent professional person should be sought.