I prepare a lot of Schedule C (sole proprietor) returns. That comes with the nature of my practice: I have a lot of professional gamblers as clients, and they file Schedule C. The IRS knows that there are unscrupulous tax professionals out there; I’ve written about many of them in the past. The IRS has decided to send out letters to some tax professionals to help “educate” us.
I have not received one of the IRS’s notices. However, a CPA in Fremont (in the Bay Area) did receive a love letter from the IRS. Via Kelly Erb comes the letter he wrote back to Commissioner Shulman. Here’s an excerpt:
Your letter stating that due to “a high percentage of attributes associated with returns typically containing inaccuracies and misinterpretations of the tax law” you feel the need, in some blanket campaign, to accuse me of improperly preparing tax returns. You supply a review of the rules and the penalties that apply to Tax Return Preparers.
The threat is a possible visit to my office.
Let me coach you on how to write a letter.
“Dear Tax Return Preparer:
Based on a mindless computer analysis, we have determined the obvious; in that you prepare tax returns for many clients who have rental properties. We are too dim-witted to understand that taxpayers often seek out tax preparers because they have rental properties and become subject to the Cost Recovery, Passive Loss and At-Risk Rules.
If you’re a tax professional, Ms. Erb’s post is well worth your time. The good news is that if you haven’t received Notice 4809 from the IRS the NAEA has stated you missed out for this year.
