| Recently, the Justice Department and the IRS went | | | | the IRS. This is pretty hard to show because the IRS |
| after several Jackson Hewitt Tax Service franchises | | | | rarely puts anything they have advised in writing where |
| for fraud for cheating the U.S. Government out of | | | | you could substantiate relying on their advice. |
| around $70 million. Apparently, most of the claims | | | | The IRS will however abate penalties from time to |
| revolved around the tax preparers making false | | | | time. In order to have penalties abated on an account |
| Earned Income Tax Credit claims which provided | | | | the taxpayer must show there is a "reasonable cause" |
| taxpayers a credit between $412 and $4,536. | | | | for abatement. Unfortunately, there is not a very |
| Eventually, the IRS will get around to examining these | | | | concrete way of guaranteeing that you can get your |
| returns and determine that a lot of the taxpayers who | | | | penalties abated. In fact, it is always an uphill battle to |
| hired the tax preparation services were not entitled to | | | | attempt to have your penalties abated - no matter |
| claim the Earned Income Credit. The taxpayers don't | | | | what your excuse is. The excuse in this case is that |
| find out that they were not qualified for the credit until | | | | you relied on the expertise of a professional tax |
| at least a year after the return is filed. That leaves | | | | preparer in the preparation of your return. Although |
| plenty of time for the IRS to tack on some penalties | | | | you have the responsibility to make sure your return is |
| and interest to your tax bill. | | | | accurate and prepared correctly before you sign it, the |
| So the question my clients have is whether they are | | | | IRS often allows an abatement of penalties for this |
| going to be liable for the taxes, penalties and interest | | | | reason. |
| that the IRS will assess against them next year. The | | | | Of course, you will always be liable for the taxes that |
| answer is not totally clear. The IRS will not abate any | | | | you owe, even if the preparer determined your liability |
| interest that accrues on a taxpayer's account unless | | | | incorrectly, but there are ways to pay off the liability |
| the IRS has made a mistake on the account or the | | | | spread over a period of time if you don't have the |
| taxpayer can show that they relied on advice given by | | | | cash to pay it off immediately. |