Enrolled Agents Are Top Choice to Prepare Tax Returns for Back Years
Failing to file tax returns present enormous problems if back taxes are due. Fortunately, when these troubled taxpayers learn of the skills provided by enrolled agents, they obtain professionals who can both prepare the delinquent tax returns and negotiate with the IRS.
Before consideration of any settlement or installment agreement, the IRS requires completed tax returns. That’s why an important part of enrolled agent service is derived from the tax training in EA CPE. Preparing tax returns is your initial first step to help delinquent filers. Only after that process can you negotiate for the taxpayer to obtain from the IRS an installment agreement or offer in compromise.
Sometimes a taxpayer doesn’t file a return for a year tax is owed that he can’t pay. This then leads to future years of not filing – even if refunds are due in the succeeding years. In these cases tax returns for several years are required. The refunds due for some years are applied to the year for which tax is delinquent. Meeting your annual enrolled agent continuing education requirements allows you to attain familiarity with the changing tax laws for each year.
Some taxpayers come to obtain your services after the IRS has created a Substitute for Return. This is the IRS version of a tax return using only the information it has available about reported income. These usually calculate a higher tax than determined by using available taxpayer deductions and credits.
A Substitute for Return uses only the standard deduction and one standard exemption. Addition dependency exemptions for spouses and children are ignored in the IRS version of a Substitute for Return. In addition, of course, the IRS cannot correctly ascertain deductions and credits.
Substitute returns are prepared in the best interest of the IRS. Consequently, the penalty and interest determined for the tax-filing year is a higher assessment that occurs with a professionally completed tax return.
The sooner a taxpayer files completed tax returns, the likelihood increases for IRS reduction of penalties due. Penalty abatement is certainly an area where ordinary taxpayers are usually helpless against IRS efforts to collect all amounts due in full. Their best strategy is to find a representative who has passed the enrolled agent test.
A strong selling point for enrolled agent services is that the IRS specifically authorizes the professional designation. That’s important to remember in promoting your tax practice after passing the enrolled agent exam.
There are many thousands of people who fail to file their legally required tax returns. The sooner you reach out to them, the more you help them avoid trouble. Penalties and interest mount quickly. In addition, the IRS eventually unleashes its harshest collection actions upon those who fail to file returns. Fortunately, taxpayers have the right to file a prior year tax return at any time.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.