e-News for Tax Professionals Issue 2016-40

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Issue Number:  2016-40

Inside This Issue

1. IRS Accepting ITIN Renewal Applications
2. Prepare for Hurricanes, Floods and Other Natural Disasters
3. Tax-filing Extension Expires Oct. 17 for Millions of Taxpayers; Check Eligibility for Overlooked Tax Benefits
4. EITC Educational Compliance Letters 5025, 5025C, 5025Q, 5138
5. Legislation Expands Paid Preparer Due Diligence Requirements
6. Oct. 17 Payment Reminder

If your client is affected by recent changes involving the Individual Taxpayer Identification Number (ITIN) program, you can now submit an ITIN renewal application to the IRS.

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The IRS offers advice to those affected by and those preparing for storms or other natural disasters. The agency is here to help and has a special toll-free number for taxpayers in federally declared disaster areas, staffed with IRS specialists trained to handle disaster-related issues.

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If you have clients whose tax-filing extension runs out on Oct. 17, be sure to double check the returns for often-overlooked tax benefits.

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IRS is sending due diligence letters to paid tax preparers who may be noncompliant in meeting their EITC due diligence requirements.

These letters are sent to raise awareness of questionable returns and assist paid preparers in meeting their due diligence requirements. However, IRS will continue to monitor the EITC returns prepared in the upcoming filing season to see if the quality of the preparers’ returns improves. The letters, in both English and Spanish, can be viewed on EITC Central.

Return Preparers who completed highly questionable EITC claims may receive one of the following letters:   

• Letter 5025, You may not have met your EITC due diligence requirements on returns with questionable qualifying children and self-employment income

• Letter 5025C, You may not have met your EITC due diligence requirements on returns with self-employment income

• Letter 5025Q,You may not have met your EITC due diligence requirements on returns with questionable qualifying children

• Letter 5138, Return Preparer EITC Client Audit Notification

        For more information on the due diligence requirements, visit our Tax Preparer Toolkit on EITC Central.

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Effective for tax year 2016, Congress expanded the EITC due diligence requirements to include two additional refundable credits – the Child Tax Credit/Additional Child Tax Credit and the American Opportunity Tax Credit.

One of four due diligence requirements is completion and submission of Form 8867, Paid Preparer’s Due Diligence Checklist. Form 8867 requires paid tax preparers certify they have confirmed their clients’ eligibility for each of the credits – EITC, CTC/ACTC and AOTC.  The draft Form 8867 and instructions, which are now available for public comment, have been modified to include these credits.

Tax preparers will be able take a free IRS training course about these changes to help them meet their refundable credits due diligence requirements, and earn one continuing education credit. Look for that in late October on the EITC Central tax preparer toolkit.  

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With the Oct. 17 filing deadline right around the corner, now is the time to remind your clients of the options available to pay their taxes. Payments can be made online, by phone, or with a mobile device using the IRS2Go app. They can visit IRS.gov/Payments to find fast and secure ways to pay.

Learn about all the payment options your clients have by watching this new YouTube video.

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