Wednesday, December 21, 2011


While I freely admit that my mind tends to wander during the required 2 hour “ethics” sermon we must sit through at least once each year during continuing education sessions, I do listen in on the discussion every now and then.  Hearing all the rules and requirements enacted in the name of privacy and security it is obvious that regulation has gone overboard.  Much of what the instructor discusses is, to be perfectly honest, totally ridiculous.

Say I was talking to a friend, who was also a client, in a public place and another client, let’s call him George, who my friend coincidently also knows, happened along, saying hello to us in passing.  If my friend asked me, “How do you know George,” I would normally think nothing of replying, “I have been doing his taxes for years”.

But by doing so, I am told, I would be seriously violating “privacy” rules! 

Obviously I am not allowed to discuss the details of George’s Form 1040, or any other financial or personal information I was told in confidence in the course of preparing his return, with my friend.  But not being able to simply mention that he is also a client is pure nonsense.

And, while it is not my responsibility as a tax preparer to personally verify every single on a client’s 1040, the IRS basically wants me to do so when it comes to the Earned Income Credit.  A tax preparer can be substantially penalized for not going through extra hoops when it comes to this credit – even if the credit itself turns out to be legitimate and the amount claimed correct.

As I wrote in an earlier post in a series on my obligations as a tax preparer -

Although I am not obligated or required to personally verify all numbers entered on the 1040 (or 1040A), I am required to do what is called ‘due diligence’ when it comes to information provided by the client. What this means is that I must –

• evaluate information received from clients,

• apply a consistency and reasonableness standard to the information, and

• ask additional questions if the information appears incorrect, inconsistent or incomplete.

Obviously, if a client says or indicates something that does not make sense, or does not seem reasonable, I must ask questions.
But if what a client tells me, or indicates on a worksheet, appears to me to be reasonable considering the individual facts and circumstances than I do not need to go any further.

When it comes to the Earned Income Credit I am required to be a bit more ‘due’ in my ‘diligence’. As a side comment, I do not think it is fair for the IRS to require tax preparers to determine if an individual is eligible for federal welfare (which, after all, is what the EIC is).”

I am a tax preparer – not a Social Worker!  The Earned Income Credit has no place being in the Tax Code in the first place.

If I had not been doing this for 40 years now without incident, and I was considering a career as a paid preparer, I seriously think I would be scared away from the profession by all of this. 

I am in a very unique situation.  I do not accept, or want, any new 1040 clients – period.  I am actually looking to “thin the herd”. 

I certainly believe that you can teach an old dog new tricks – but some new tricks come with too much agita that they are not worth learning.  It is easier for me to say, “I will never have a client that this would apply to”, or, “If this applies to a client I will just send him/her elsewhere” then to put up with the added agita.

There have been times during the last few years when I have seriously considered retiring in December of 2013, so I would not have to put up with all the new aggravation, including the new paid preparer regulation regime (which I do, for the most part, support).  42 years would be a good run.  And waiting till the end of 2013 would give me time to look into more opportunities for income from writing on taxes and other topics, so I would still be able to eat.

But what about my 300+ clients?  It would be very easy to say good-bye to some – but a great many have relied on me for so many years that it would be difficult to tell them I could no longer prepare their returns.  Hey, if I won the lottery it would be one thing.  But not to voluntarily just walk away.

So I guess I will hang in there until the idiots in Congress or the IRS go too far.  Maybe, as I hope and pray, the current Tax Code will be totally shredded and a more simpler one written in the next two years.


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