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Which Form to Use When Filing Tax Return

February 29, 2012 By

The 2012 tax season is here with us again and by April 17, 2012, taxpayers seeking to beat the first deadline of tax returns will need to have filed their return. The extension from the traditional 15th date was made as April 15th is a Sunday and Monday the 16th is a holiday in Washington D.C. 2012 being a leap year also means that taxpayers have yet another extra day this year (February 29th) to prepare their taxes. As usual, those who file for an extension will have until October 15th to file returns.

IRS Not Sending Forms this Year

As most taxpayers have shifted to the e-filing option filing returns with 76% of the filers in 2011 having opted to go for electronic filing, the IRS has chosen to discontinue the mailing of tax return forms to taxpayers. Therefore, do not expect to get any more tax return forms in your mail box. The forms are however, available for those who still choose to file paper return. You may either download the tax return form from the IRS website or call the IRS toll free number to request the form.

Different Tax Return Forms

Taxpayers have 3 tax return form options to use if they chose to go the paper filing way. They can either file their returns on a Form 1040, 1040A, or 1040EZ. The form you use depends on your income, your filing status, and whether or not you want to claim any deductions.

  • Form 1040 – All taxpayers who make an annual income of more than $100,000 must use the Form 1040 when filing manual returns. Others who are required to file using Form 1040 include those who itemize their deductions as opposed to claiming the standard deduction. If you sold a property and made a capital gain, you are also required to file Form 1040. Finally, those who made income through self employment will also need to file using this form.
  • Form 1040A – This form of filing tax returns is simpler and has less entries to make. A taxpayer whose income is below $100,000, who receives some dividend distributions and who has over-the-line adjustments such as a student loan interest deduction or an IRA contribution income can use this much simplified form for his or her returns.
  • Form 1040EZ – The Form 1040EZ is the simplest tax return form and can be used by taxpayers who have an income of $100,000 and below and who have no dependents that they are claiming. The form is only available to those who have a filing status of single or married filing jointly. Furthermore, the amount of interest income that you got in the year of filing should not have exceeded $1,500 when using this form.
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5 Tips to a More Effective 2012 Tax Season

February 28, 2012 By

 The 2012 tax season is finally here and taxpayers have started filing returns. If this is the time you are getting started with your returns, then the tax tips below may help you with this process

Get all Your Paperwork in Order

The most important task for your tax preparedness is proper filing of all your tax related documentation. This will help you or your tax preparer prepare your tax return with ease and accuracy. You do not have to remember entries or expenses that you incurred in the beginning of last year. These important documentation for filing includes all Form 1099s – this include 1099DIV for dividends, 1099INT for interests, 1099MISC for payments that you received for services offered to other business, among other 1099 forms. The W-2 forms are also an important documentation as it shows the wages that you received and the taxes that were withheld from these incomes. These forms will help you with the income section of your Form 1040. Besides incomes, you need to file any expense receipts that you are seeking to claim tax deductions or credits. These includes payment for qualifying medical expenses, acknowledgment of donations made to qualifying charities, educational related expenses, child care expenses, car related expenses, receipts for business related expenses, payment for qualifying work uniform and such like receipts. If you bought or sold a house or other asset, you will need the documentation for calculating capital gains at the point of sale. Various other federal and state tax entries may require other support documentation

Use the IRS Free File System

Another tax tip for 2012 is to use the Free File System. Taxpayers can now use the system to prepare their taxes for the 2011 tax year. For taxpayers who had an annual income of less than $57,000 in 2011, they have an option of 20 tax preparation software to choose from to prepare their taxes free of charge. The software is available on the IRS website.

File Electronically

You can also consider filing your taxes this year electronically if you have never done so. The e-filing system has become a huge success for the IRS over the years with the 2011 tax returns recording the highest percentage of e-filers with 79% of all filers choosing to file electronically. Filing electronically comes with several benefits. Firstly, you get to receive your refund check much faster. The IRS endeavors to process refunds within 5 days for those who file electronically and choose the direct deposit option of receiving the tax refund. Besides getting refunds faster, the e-filing system also helps with the addition of numbers, as this is done automatically. E-filing is also convenient as you can file at anytime and you do not need to incur costs of posting or delivering paper returns.

Consult a Professional Early

This year, you can also consider getting a consultant early to prepare your taxes before the tax season picks up. Getting a consultant early is much easier as compared to tax time as most consultants get engaged as the deadline draws nearer. You also get to have more time with the tax professional and you can get tax advice, get answers for questions you may have relating to taxes and also have more scrutiny and attention being given to your return.

Make Use of the IRS Website

The IRS website is has a wealth of information and resources for any tax related issue. The website has also been greatly enhanced and improved in 2012. The navigation of the website has been improved and there are now easy shortcuts to your favorite sections. You can also get information about credits, deductions and videos to help you with your returns.

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IRS Officially Opens the 2012 Tax Season

February 27, 2012 By

The IRS officially announced the opening of the 2012 tax season on January 4, 2012 with a statement on their website. They also announcement that the official tax deadline was extended by 2 days to April 17, 2012, owing to the fact that April 15th is a Sunday and April 16th is Emancipation Day (that is an official holiday for the District of Colombia). The federal law allows the IRS to treat holidays observed in D.C. as it does federal holidays as far as deadlines are concerned. For those filing for an extension, the deadline for such extensions will remain as October 15th. In the opening announcement, the IRS stated that it was anticipating that about 144 million taxpayers would file returns for 2011 and that more taxpayers would file electronically than they did 2011, especially given that the IRS will, in 2012 onwards, not send out tax return forms on mail as it did previously. In 2011, 76% of taxpayers filed using the e-filing system.

What’s New from the IRS in 2012

As they announced the commencement of the tax season, the IRS also took the opportunity to inform the taxpayers of the new services and the improved services that they had for 2012. This was in line with the IRS goal of continually improving the taxpayers’ experience. Some of these services that have been made available to taxpayers in 2012 are:

  • More Information and Easier Navigation on IRS Website – The IRS website continues to remain the main platform through which the tax authority provides services and information to taxpayers. In 2012, the IRS has improved on various features with popular pages having shortcut navigation buttons at the home page. The IRS also stated that it had significantly improved on its quality of content to address more issues raised by taxpayers.
  • Interactive Videos for Help on the IRS website – Another feature added to the IRS website is a section of interactive videos. Now, taxpayers can view these interactive videos to learn how to perform various tax related tasks such as filing electronically.
  • Two Way Video Conferencing in 10 IRS Offices – The IRS has also introduced an e-conferencing services where taxpayers can visit one of 10 pilot IRS offices and chat on a live conference with an assistant. The service is still in a Beta stage.
  • New PTIN for Preparers – In 2012, all tax preparers are now required to have new Preparer Tax Identification Numbers (PTIN) and use these numbers to file their clients’ returns.

Other Tax Preparation Tools and Services Still Available

The IRS has also reminded taxpayers of the other value services that are still available to taxpayers. These include:

  • Free File – Free file is a free tax preparation software that enables taxpayers whose income is below $57,000 for 2011 to prepare their taxes free of charge. These taxpayers have 20 commercial software to choose from to prepare returns and this is all available free of charge. Taxpayers with a higher income that the stipulated cap may pay a fee to prepare their taxes using these software. However, the Free File Forms are available free to all taxpayers.
  • E-filing – Taxpayers are reminded that the e-filing system is on and still the preferred option for the IRS. The IRS continuous to offer incentives such as faster relaying of refunds for those who file electronically in a bid to have more and more taxpayer shift to filing electronically.
  • IRS2Go – In 2011, the IRS also launched a mobile application system, IRS2Go, which is available to mobile smartphone users. The solution enables taxpayers to track their tax refunds with their mobile phones, among other services.
  • Free Tax Preparation Services – The IRS also reminded taxpayers with an income of less than $50,000 a year that they could get free tax preparation services from Volunteer Income Tax Assistance. For senior citizens above the age of 60, they could get free tax preparation services relating to income taxes from Tax Counseling for the Elderly.
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Various Tax Related Forms that You Will Need for Your Tax Returns

February 24, 2012 By

There are various tax forms that a taxpayer receives in relations to various incomes and earnings that he or she gets within a given year. These forms are important, as they assist you with your income entries on the Form 1040 when filing returns. It is important that you indicate and use the correct amounts as indicated on these forms as the IRS receives a copy of these forms and counter checks the amounts indicated once you file your returns. These income-related tax forms are explained below:

  • W-2 – The W-2 form is a form that you receive from your employer indicating the wages paid taxes deducted among other deductions. This is an important tax record to file in your tax file. All employees who received wages should be given the W-2 form irrespective of amount paid. However, for contracted workers, they receive form 1099MISC for their pay if the amount exceeds $600. Form 1099MISC is explained below.
  • W-2G – The W-2G form is given for any gambling incomes. The gambling incomes also need to be reported in your tax return and the appropriate taxes paid on this. However, not all gambling wins get the form W-2G. There are various caps that apply. However, irrespective of whether you received a form W-2G for your gambling earnings or not, you are still required to report all such incomes in your return.
  • 1099MISC – The Form 1099MISC is issued for most incomes that are not categorized under a unique form. Some of the incomes that are accompanied by this form include wages from contract labor, incomes for business to business services including rent income from a business, and incomes from winning a competition or tournament. For you to receive the Form 1099MISC for your qualifying income, the income should exceed $600.
  • 1099DIV – The Form 1099DIV is given by all investment managers including stock brokers, fund managers, listed companies, and banks that distribute dividends. If you receive dividends of over $10, you will receive the form. However, even for amounts that are below $10 and therefore are not accompanied by a Form 1099DIV, one is still expected to report the dividend as income.
  • 1099INT – The Form 1099INT is issued by all institutions that distribute investment interest. The rules for this form are similar to those of the Form 1099DIV and interests below $10 do not receive the form but are still to be reported in the returns.
  • 1099S – The Form 1099S is issued by a property agents who gets to sell your property. It is however, not required if you are selling your personal residence and are entitled to an exclusion for personal residence sale. For property that is not personal residence, purchase price of the property should be deducted from amount indicated on the form and the difference indicated on the Form 1040 as a capital gain or capital gain loss.
  • 1099R – The Form 1099R is given for every retirement benefit distribution. This includes pension distributions and distributions from your IRA.
  • 1099G – The Form 1099R is given by states for any distributions made in relation to taxes. This includes itemized deductions that were made of the state tax returns and any unemployment benefits that you received from the state.
  • K-1 – The K- form is issued to shareholders of an S-Corporation, partners of a legal partnership and the beneficiaries of a trust or an estate. It provides details of the share of profits and earning made.
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Considerations When Seeking a Tax Preparer

February 23, 2012 By

Most taxpayers in the U.S. prefer to use a tax preparer to file returns. If you are one of these taxpayers, you need to start identifying the professional to handle your taxes in good time before the tax season sets in. There are various factors you should consider when seeking the ideal preparer to handle your taxes. Below are some of these factors:

Skills and Qualifications

One of the considerations when selecting a tax preparer to handle your taxes is skills and qualifications. Find out the skills that a preparer has to handle your taxes. As of 2012, all tax preparers are now required to get Preparer Tax Identification Numbers (PTIN) after registering with the IRS. Your preparer should therefore posses this license to legally prepare your taxes. Besides this, you should consider other qualifications such as CPA certifications or an attorney with tax specialty. There are also other trainings and skills that can qualify one to professionally handle your taxes and you need to review such qualifications.

Experience

The other important consideration is ones experience. Even with the right qualifications, you get to enjoy better quality services if you go for an experienced preparer. There are some issues and procedures of taxes that are better handled from an experience perspective. When it comes to dealing with IRS audits or complicated tax matters, you may also be better placed if you are dealing with a more experienced professional. Therefore, always ask for the years that one has been practicing in the field and the number of clients that he or she has handled over the year.

Availability and Reliability

The availability of a tax preparer is yet another important consideration. There are many preparers who handle too many clients to the extent that they cannot provide you with quality services. You should weary of such preparers. Try and get a tax preparer who has time for you and who is able to give you personalized service. He or she should be able to give you tax advice as he or she prepares the taxes. You can tell the availability of the preparer by the amount of time that one is willing to spend with you and how often one gets to communicate with you proactively.

What Returns they Handle

Another important consideration is the type of taxes that the preparer handles. There are tax preparers who only handle Federal taxes and do not handle State and local taxes. There are yet other preparers who only handle issues of negotiations with the IRS when it comes to installment taxes or Offer in Compromises. You therefore, need to ascertain the scope of taxes handled by a preparer so as to know whether he or she can handle all of your tax needs.

Terms of Service

You should also review the terms of service that a preparer gives you for his or her services. Some tax preparers undertake to handle any IRS audits should one arise from returns that he or she has prepared on your behalf. Others will not handle audits or will handle such audits as an extra paid service. There are preparers who provide tax refunds in advance.

Fees

Different tax preparers will charge different fees for their services. You therefore, need to review the charges levied and the terms of payment. You should be weary of tax preparers who request a commission based on the amount of refund they are able to get you as most of such preparers use unorthodox and illegal ways of inflating your refunds. You should also be careful of preparers who insist on receiving refunds on your behalf.

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Why Do Some Tax Refunds Take Much Longer to Get to the Taxpayer?

February 22, 2012 By

The tax season for 2012 is in full swing and as is expected, many taxpayers will be anticipating tax refunds from Uncle Sam for overpaid taxes and from refundable tax credits. For taxpayers who file using the IRS e-filing system and who elect the direct deposit option of receiving their refunds, the IRS works at processing the refunds within 10 days. In fact, according to the IRS website, taxpayers who filed on the e-filing opening day of January 17th should have received their refunds by January 25th.

However, even with the improvements in the IRS that have lead to the shortening of the waiting time for refunds, there are still some taxpayers who have to wait very long before getting their tax refunds. There are various factors that may cause such a delay;

  • Paper Check Refunds – Taxpayers who do not opt for the direct deposit option of receiving their tax refund will have to receive their tax refunds by paper check through their mail. Paper check refunds take a much longer time to get to the taxpayer than bank deposits. For taxpayers who file electronically and request for the bank deposit, the IRS works at having the funds transferred in less than 10 days. For taxpayers who file electronically but request for a check, the check is mailed by the IRS after a much longer time. There are further delays – for the mail to get to the taxpayers mail box and for the taxpayer to cash the check.
  • Paper Filing – For taxpayers who opt to file their taxes manually on a hard copy form, the refunds will even be delayed further. The tax return form will need to be reviewed manually by an IRS employee and this can get to delay the tax refunds for much longer. The IRS has been encouraging taxpayers to file electronically as this enables the automation of reviewing of tax returns thus reducing on time and resources.
  • Credits Requiring Attachments – Some tax credits can only be claimed if the taxpayer files a manual return. Returns that require the taxpayer to attach a supporting document or file Form 1040 attached to other tax forms will require a manual tax return. For example, people claiming the Adoption Credit will need to file manually and attach documentation for the claimed expenses.
  • Entries Requiring Manual Scrutiny – For some confusing tax credits, deductions or entries, the IRS can choose to manually review all the tax returns for taxpayers who claimed such reliefs or have such entries even if the taxpayer filed electronically. Manual scrutiny will therefore mean that the refunds will be delayed. For example, in the 2011 tax season, taxpayers who had claimed the First Time Home Ownership Credit in 2008 and that required repayment experienced prolonged delays in their tax refunds as the IRS scrutinized each return manually.
  • Delays Within Bank – Delays can also be caused by the taxpayer’s bank. According to the IRS website, the IRS states that it transfers tax refunds for taxpayers who file electronically within 10 days of filing. The IRS then places a disclaimer that delays may be experienced for some taxpayers depending on the taxpayer bank procedures.
  • Errors and Discrepancies – If a tax return has errors that are identified in the tax system, the refunds will not be processed and instead, the IRS will send a correspondence requesting you to explain the error. It is therefore, important that you carefully review your returns before submissions to avoid delays from simple careless mistakes. However, for some minor errors such as an addition mistake, the IRS may correct the tax return and process it within the normal timelines.
  • Filing an Amendment – Filing an amendment can also significantly delay your tax refunds. Therefore, if you had made an error on your original returns and have filed an amendment, you may have to wait a little bit longer before you get your refund.
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Had a Baby at the End of 2011? Here’s Some Great Tax News!

February 21, 2012 By

Did you have a baby before December 31st, 2011? Well, the tax code is set such that all benefits that accrue to a taxpayer do so annually, irrespective of the time of the year one gets to qualify. This means that if you had your child on December 31st of a given year, you get the full tax benefits of the child for the whole of that year. This is more of a bonus for those who get their children late in the year. The same tax bonus is available for parents who adopt a child late in the year. Therefore, if you are planning to harvest on this tax bonus, it may be wise to plan your timing for having your child or for adopting one. There are various tax breaks that you can claim for the whole year, irrespective of the time of the year that your child was born or adopted.

Personal Tax Exemption on Dependents

For a start, you can claim personal tax exemptions on all your dependents for a given year. This personal tax exemption is deducted from your Adjusted Gross Income (AGI) and consequently, reduces the amount of tax that you get to pay. For the tax year of 2011, the tax code allows for an exemption of $3,700 for every dependent that you claim on your tax returns. This means that your adopted or natural child gets you this exemption for 2011 even if born or adopted at the end of the year. This exemption is only accorded to those whose income fall in or below the 28% tax bracket. The personal tax exemption is provided to taxpayers as an adjustment for inflation and increases in cost of living.

Child Tax Credit

Besides the personal tax exemption, the taxpayer who gets a child within a given year is also entitled to the child tax credit. The tax credit is given for every child that a taxpayer has. There are income limitations to claiming the tax break and therefore, people who earn from the higher tax brackets may be locked off from this benefit. For 2011, singles who earn above $55,000, head of households who earn above $75,000 and those who file jointly and have an income above $110,000 cannot claim the Child Tax Credit. However, for the rest of taxpayers who earn below these caps, claiming the credit is easy as all you do is list all your children on the tax return form 1040 and you get to claim $1,000 per child in 2011. This is an extra $1,000 bonus for the parents who get a child late in the year.

More Earned Income Tax Credit

Another tax relief that you are entitled to for your child is higher Earned Income Tax Credit (EITC). EITC is a tax credit that is provided to lower income earners. The qualification and amount of EITC that a taxpayer gets is dependent on the number of children that one has. Therefore, having an extra child, irrespective of the time of the year that you get the child, will increase the amount of EITC that you can claim or even get a taxpayer who would otherwise not qualify for the credit get into the qualification bracket.

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8 States Increase Minimum Wage Rate in 2012

February 20, 2012 By

At the wake of 2012, eight states reviewed their minimum wage rate and had the rate increased in line with inflation rates. The move has come as a welcome boost for many low income American families that struggle to make ends meet. These 8 states that have increased their minimum wage rate are Florida, Ohio, Washington, Arizona, Montana, Colorado, Vermont and Oregon. The increase in the rate ranges between 28 cents to 37 cents an hour and this translates to between $582 and $770 a year.

Federal Minimum

The Federal law sets the minimum wage rate for the whole of the United States at $7.25 per hour. Some states, such as the eight mentioned above, have the rates higher than that of the national minimum. Having the rate above that of the federal minimum is ideal, especially for states that have a higher cost of living, as this works to compensate the lower income earners. In fact, there are 10 states that review their minimum rates annually (including these 8 that hiked in 2012) to ensure that the rate is adjusted to inflation and thereby, conserve the ability of low income earners to retain their purchasing power. The remaining 2 states that make annually adjustments for inflation include Nevada that makes its reviews in July and is therefore, to make its hike then, and Missouri, whose adjustment rate has remained below the federal rate and therefore, the minimum federal rate continues to apply in this state.

As of January 2012, there were 19 states including, D.C., that had their minimum rate above the federal minimum. The remaining 31 states have their minimum rate at the federal minimum of $7.25 per hour.

EITC – Tax Relief for Low Income Earners

Besides setting the rates for the minimum wages that an employer should pay a worker, the government also provides further relief to low income earners. The government provides a tax credit of up to $5,751 to such taxpayers. The tax credit is referred to as the Earned Income Tax Credit (EITC) and the amount of tax credit that one can claim depends on ones income, the filing status and the number of dependent children that a taxpayer has, among other factors. The IRS has places of service on their website to assist taxpayers determine if they qualify for the credit and how much they can claim. For the 2011 tax year, taxpayers with no children can only claim the EITC if their income is less than $13,660 for those who file as singles or head of households, and $18,790 for those who file jointly. The maximum amount of credit that they can claim is $464. For taxpayers with one child, the cap for income to claim EITC goes up to $36,052 for single filers and $41,132 for those who file jointly and the maximum credit they can claim is $3,094. For taxpayers with 2 children, they can only claim the relief if their income is below $40,964 for single filers and $46,044 for those who file jointly. The maximum credit that they can claim is $5,112. Finally, taxpayers with 3 or more kids can claim the EITC if their incomes go up to $43,998 for single filers or $49,076 for joint filers with a maximum credit of $5,751.

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5 Tax Tips for 2012 Worth Considering

February 17, 2012 By

The beginning of a year is always an ideal time to reflect on ones life. However, as you make plans and resolutions for the new year, it is also advisable to consider the various tax implications of these moves. Besides this, it is also important to make resolutions and decisions concerning your taxes. Properly planning of taxes at the beginning of the year can save you lots of money and time. Below are some tips that may help you as you make such tax plans;

Consider Implications of Life Changes to Your Taxes

As you plan for various decisions that you want to make in 2012, it is important that you consider the tax implications of such plans. Many of the significant life decisions come with significant tax implications. Getting married, getting or adopting a child, buying a house, selling your house or car, retiring, going into business, changing your job, going back to school, or divorcing your spouse all have a huge impact on your taxes and you may need to consult with a tax professional on the implications before making the move.

Better Filing Will Save Your Time and Probably Cash

Keeping proper tax records will save you a lot of time when it comes to filing returns. The process of keeping proper records can be tedious but if you get used to it, you will subconsciously get to keep the records well. In order to have proper filing, you will need to know the important documentation that is needed for your taxes. Depending on the tax reliefs that you will be claiming and the incomes that you have made, you need to properly file all receipts for educational related expenses, health expenses, receipts of any sale of asset such as a house, receipts that have local and state sales taxes, statements from your stock broker and such tax related records. You should also properly file all the Form 1099 that you receive as these correspond with tax entries that you will be making on your tax return form. Having proper records will not only enable you to easily prepare the taxes but will also protect you from any issues that may arise with the IRS.

Self Employed? Consider Tax Implications of Each Business Move

If you are self employed, the beginning of the year is also an important time for you to plan your taxes. Unlike those employed, self employed individuals have more control over their tax deductible expenses and the way they handle tax issues. You therefore need to plan and consider taxes as you plan to expand your business, get into partnerships and joint ventures, sell of business stakes, renting new property and applying for a license. Proper planning beforehand can save you lots of money in taxes.

The Independent Contractor or Employees Question

Another important tax consideration you may need to make in 2012 is determining whether your workers are independent contractors or employees. For a long time now, employers have not been keenly categorizing their workers and to avoid tax implications, many have been lumping up various employees as independent contractors. However, the IRS has announced that it will be applying more scrutiny to employers who pay workers as independent contractors. If an employer is found to have been erroneously paying employees as independent contractors, they may be liable for taxes foregone, interest, and penalties. It is therefore, an important time to review this and get into compliance.

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Tax Preparer Compliance Update and Related TIGTA Report

February 16, 2012 By

The IRS introduced new tax preparer rules that came to effect in January 2012. The rules have been put in place to increase surveillance and ensure professionalism in the tax preparer industry. All tax preparers are now required to apply for a Preparer Tax Identification Number (PTIN) license. This license is to be renewed every tax year. For professionals including CPAs and attorneys, getting the PTIN will be automatic as long as there are no outstanding issues with the IRS. For the other tax preparers, they will be required to sit for an exam to evaluate their ethics and their competence in handling taxes. Besides this competence test, these preparers will also be required to undertake a 15 hours tax training every year before renewing their license. 

12% Yet to Comply

According to the rules that were introduced in 2011, every tax preparer who sort to practice in 2012 and who is not a qualifying professional needed to have sat for the competence test by December 31st of 2011. As of this date, 12.5% of preparers were yet to comply. This means that in 2012, there will be less preparers available to assist taxpayers with their returns.

TIGTA Report Reveal Felons and Prisoners Received PTINs

An audit by the Treasury Inspector General for Tax Administration (TIGTA) revealed that there were some anomalies about the preparers who managed to register in time for the 2012 tax year. According to the audit report, there were 962 prepare who had received the PTIN license but who had been imprisoned in the last 10 years. A vast majority of these people did not disclose their felony convictions. Furthermore, to add the proverbial insult to injury, about 320 of these prepares were actually serving a sentence at the time of application. In fact, 43 of them were actually serving life sentences!

The issue of having convicts as prepares is especially serious as there have been quite a number of tax return frauds that have been done from prisons in the past. In response to these frauds, the IRS had committed to keep those in prisons from having preparer licenses.

Rules did not Prohibit Prisoners from PTINs

Having prisoners and people who had recent felony convictions being licensed with the PTIN license may not have been entirely an oversight on the part of the IRS. This is because the rules of application for preparers did not require one not to be a prisoner. This means that the preparers actually held the licenses legally.

IRS Commits to Increase Vetting of Preparers

Following the TIGTA audit report, the IRS has adjusted its tax preparer rules and from beginning of 2012, no person who is serving a jail term will be permitted to be a preparer. This means that all the 320 convicts will have their licenses suspended. The IRS has also committed to ensure that no person with an IRS criminal record gets a PTIN license.

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