should go unasked. Not asking the questions on
Form 8862 would be a very dangerous task for you as a tax preparer. Please
don't think that this is not going to happen to you or that the Internal
Revenue Service will only go after the big guys such as H&R Block and
Jackson Hewitt. The rules apply to every tax professional even if that tax
professional only prepared two tax returns. Remember! Use Form 8862 as a
worksheet in your interview and when allowing your clients to take the
Earned Income Credit.
Let's take an example when you must use Form 8862
in preparing a tax return for your client. In 2014, your client was
age 24, single, and living at home with his parents. He worked and he was
not a student and earned $7,500. His parents cannot claim him as a
dependent. When he files his tax return, he cannot claim the Earned Income
Credit because he is not at least age 25.
Your tax preparation software
would most likely catch this mistake because your client is not at least age
25. However, let's say you not only did not fill out the Form 8862 diligence
worksheet, but you also did not fill out the correct age in you tax
software. As a result, you give your client the Earned Income Credit. This
is a tax preparation mistake an also a negligent disregard of the EIC due
diligence rules. When the Internal Revenue Service asks for the due
diligence requirement record, they will fine fine you $500 for that client
if you fail to provide it.
Remember that any refund you receive as a result of taking the EIC will not be used to determine if you are eligible for
temporary assistance for needy families, Medicaid and SSI, or
supplemental Nutrition Assistance Program and low income
housing. The refund you receive because of EIC cannot count as an
asset to determine qualification for these benefits.
Everyone must do their part and provide
documentation for everything that has transpired. There are steep penalties
for everyone for failing to comply. Your employer must provide or send Form W-2 to
you no later than January 31, 2015. If you do not get a Form
W-2, you still have to report your earnings on your tax return.
You should not file your tax return without Form
W-2. Also, if your employer has not sent you a copy of your W-2 yet, then
they most probably have not sent a copy to the IRS so asking the IRS for a
copy is probably not an option. Besides, if they do have a copy, a copy
would not be made available to you since it is too early in the tax year.
Your employer has until January 31, 2015 to mail your Form W-2 to you, but
has until March 2, 2015 to submit the forms to the Social Security
Administration and to the Internal Revenue Service. The good news is that
once you ask your employer for Form W-2 and if he refuses, you can file a
substitute form to report your wages to the Internal Revenue Service on Form
4852. You have to allow enough mail processing time after January 31, 2015
and/or visit the employer to make your request before you can file Form
4852. The point is that you must wait until after January 31, 2015 in order
to file your substitute wage form. Form 4852 is not a form you would file on
January 7th, for example.
In this course we will be
reviewing some basic tax preparation concepts regarding income, deductions
and credits on your tax return. One of these basic tax preparation items is
interest income. When you receive interest income as a nominee, it
means that the income is in your name, but it actually belongs
to someone else.
