Representing the Taxpayer with No Records

The electronic world has gotten smaller, and it is now more difficult for non-filers to hide from the Internal Revenue Service (IRS). The IRS is now able to locate non-filers with far greater ease than ever before. As a result, non-filers often show up at the practitioner’s office needing to file a return or multiple returns, but do not have records to give to the practitioner. For practitioners who are involved in tax preparation or representation before the IRS, issues related to these non-filer clients with no records are coming up increasingly frequently.

Increased IRS Enforcement Increases Exposure to Preparer Penalties

Under U.S. Code: Title 26 – Internal Revenue Code, tax return preparers can be exposed to a number of fines and penalties including imprisonment. Tax return preparers guilty of a felony for fraud and false statements may have to pay a fine of up to $100,000 or $500,000 for a corporation and are subject to imprisonment of no more than one year, or both.

It is imperative for practitioners to know how to minimize their exposure when filing a return with a lack of documentation. Tax practitioners must understand the documentation requirements when filing a return and the steps they must take to assist a client when they do not have records to file. When handling a taxpayer who lacks records, both when filing a return or later (when the client is under exam), tax preparers must walk a difficult line. While they can generally “rely in good faith without verification upon information furnished by a taxpayer,” according to the IRS, they cannot “ignore implications of information furnished to the tax return preparer or actually known by the preparer. A tax return preparer must make reasonable inquiries if the information as furnished appears to be incorrect or incomplete.”

Taxation practitioners are thus faced with not only worrying about protecting their clients but also protecting themselves from preparer penalties when filing a return where the records are either reconstructed or non-existent.

Helping Clients Reconstruct Their Records While Minimizing Exposure to Return Preparer Penalties

In an upcoming webinar hosted by Eli Financial, “Representing the Taxpayer Who Has No Records” with taxation attorney Eric L. Green, Eric will discuss how practitioners can help clients reconstruct their records and handle IRS requests. The session will also discuss the steps practitioners must follow to have a client do a voluntary disclosure when there is reason to be concerned about the returns to be filed. Practitioners will also get the ins and outs of handling a client with no records – from the tax return preparation to responding to the IRS notice.

To join the conference or see a replay, order a DVD or transcript, or read more

Niyati Behl

Niyati has extensive experience in identifying key industry trends and the latest regulatory and legislative changes within the healthcare, insurance and finance industries. Previously, she worked as a project consultant in the tire industry, where she identified changes in regulations, trading policies and other economic and political factors impacting the industry.

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