Tax Tips
| Jurisdiction | Colorado,United States |
| Citation | Vol. 8 No. 9 Pg. 1690 |
| Pages | 1690 |
| Publication year | 1979 |
1979, September, Pg. 1690. Tax Tips
The Denver, Colorado District Liaison Meeting commenced at 9:00 a.m. Present were representatives of the Internal Revenue Service, Colorado Bar Association, The Colorado Society of Certified Public Accountants, The Public Accountants' Society of Colorado, and The Colorado Association of Enrolled Agents. Stephen S. Kurtz, Chairman of the Liaison Sub-committee of the Colorado Society of Certified Public Accountants, made introductory remarks.
Mr. Mihlbachler welcomed everybody to the District Liaison Meeting and expressed his appreciation that representatives from the Public Accountants Society of Colorado and Society of Enrolled Agents were in attendance.
Mr. Mihlbachler indicated that in conjunction with the Colorado Revenue Department, the IRS was utilizing a tax mobile to go to certain areas of the city and state to help people in preparation of their income taxes.
The reorganization of the IRS, which had been discussed for the last several years, has now been completed. Also, as of February 16, 1979, the IRS has realized approximately a 10 percent increase in tax returns.
Mr. Rollie Friess, new Chief of the Examination Division, discussed results for the fiscal year ending September 30, 1978. He indicated that there were sixty-four returns in which the $100 negligence penalty had been assessed and one return where the $500 penalty had been assessed. As of the first quarter of the current year, twenty-six returns had been assessed with the $100 negligence penalty and 109 returns have been assessed with the $500 penalty.
Carr Conway, Returns Program Manager of the Examination Division, then gave some overview as to the IRS administration of the tax return preparer penalties. Mr. Conway indicated that the district was responsible for reviewing those cases where there was a deficiency in the tax return to see whether or not a preparer penalty should be assessed. The examination of the preparer will take place after the taxpayer examination is complete. Form Number 577 is prepared on all cases to evaluate preparer compliance. If there is no assertion of preparer penalties, then the form just goes into a file. If there will be an assertion of the penalties, then the preparer is contacted. It was also indicated that the Service Center is responsible for all identification penalties.
At this point, it was also mentioned that the IRS is very strongly looking at the abusive family trusts and will look at practitioners who are engaged in preparation of trust returns in order to assert the maximum penalties allowable.
Some examples of the negligence penalties were:
A. Schedule G computation--- both taxpayers claimed were dependents of another.
B. Fictitious deductions.
C. Deliberate estimate of employee business expenses.
D. Taxpayer and practitioner collusion to put an obvious error on a tax return.
E. Section 274 substantiation.
F. Office and home expenses where no income from activity.
G. Computation of the inventory reserves where there is no basis for the reserve.
H. Careless errors (excess first year depreciation).
I. $15,000 worth of income and $11,000 worth of real estate taxes where the practitioner didn't question.
It was also indicated that any willfulness penalty will be referred to the Criminal Investigation Division for review. It was noted that the practitioner should not be responsible to audit each return he prepares, yet must ask questions to determine the reasonableness of the expenses deducted. Also, if there is no deficiency resulting from the examination of the return, no preparer penalty will be assessed.
Mr. Friess indicated that all...
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