1. Home
  2. Taxes General Forum
  3. suspicious EITC

suspicious EITC

A client's household employee was notified by the state of NY that it needs additional information. The employee filed her tax return claining the earned income tax credit before she received her W-2. The preparer listed an amount on Schedule C. The amount happens to be just enough to generate the highest amount of federal EITC at the lowest possible SE tax level. Not to mention that the amount listed was far less than the employee's net pay.

  1. Are we obligated to tell the IRS about this (I'll be charitable here.) mistake?

  1. Any suggestions for how to cover our behinds?

Thanks, Gary

Reply to
Gary Goodman
Loading thread data ...

Even if the household employee was your client (and apparently she is not), you still would not be obligated to tell any third party, let alone the IRS.

If she *were* your client, per IRS Circular 230 (which I assume you are subject to), you would be required to inform the client of the error, and what the consequences are for not correcting it. That's it.

You could also consider filing a Form 14157, Complaint: Tax Return Preparer, which I believe is new this year, but it is designed to be filled out by the client, not another professional.

I won't even ask what the State of NY has to do with federal EIC....

Reply to
Mark Bole

New York also has a refundable EIC, normally 30% of the Federal amount.

Don EA in Upstate NY

Reply to
Don Priebe

"Gary Goodman" wrote

Nope.

It doesn't sound like your "mistake" to worry about. How my clients employees file their returns is of no concern to me or my clients.

Reply to
paulthomascpa

Why does your behind need to be covered? How did you get to see the employee's tax return? Has she now become your client? Is she asking you for help with the NY State notice?

Bob Sandler

Reply to
Bob Sandler

New York has an EITC. The state sent her a notice requesting information about her Schedule C. The reason we are in this mess is that the client only recently admitted he had a household employee. He paid her cash and we are looking at ways to bring him to the legit side of things. Of course he is worried about the cost of compliance (our fees for filing payroll returns, payroll taxes, etc.)

I think the employee is upset that she will have to pay back the EITC. We may advise her to complain about the preparer.

Thanks, Gary

Reply to
Gary Goodman

I've seen several opinions here that you are under no obligation to report the offending preparer. As one who spent many years on the IRS side, I'd think any legitimate preparer would feel a moral obligation to help rid the system of those who would seek to undermine it.

Reply to
paultry

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.