IRS Advisory on Prepaying Property Taxes

The IRS issued an advisory that states prepaying 2018 property taxes in 2017 will only be deductible if the 2018 property taxes were assessed prior to 2018. Thus a prepayment of anticipated property taxes that have not been assessed prior to 2018 are not deductible in 2017. State and local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

For more information and examples see the IRS news article IRS Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017 on the IRS website.

Reminder of the Federal Refund Delay for Upcoming 2018 Filing Season

This is a reminder that refunds will not be released again this coming filing season until February 15 for federal returns that claim the Earned Income Tax Credit (EITC) or the Additional Child Tax credit.

The IRS will begin to release the refunds on these returns starting February 15. However the IRS is cautioning everyone that these refunds most likely will not begin to be deposited until February 27, 2018.  This is due to several factors, including banking and financial systems requiring time to process the deposits.

Therefore any return claiming one of these credits that is prepared in January or early February will not be deposited in the normal IRS refund timeframe.

See the IRS news release of November 7 - Get Ready for Taxes: Plan Ahead for 2018 Filing Season to Avoid Refund Delays for more information.

IRS e-Services Now Requires Users Be Registered Using Secure Access

This is to let everyone that has an IRS e-Services account know that they must register through the Secure Access two-factor authentication process in order to access their account.  This began on December 10, 2017.

If a user had already registered using the Get Transcript, View Your Tax Account or IP PIN online tools they should use that password and their e-Services user name.

See the e-Services – Online Tools for Tax Professionals and the Important Update about Your e-Services Account pages on the IRS website for more information.

For more information on what an individual needs to do to register for the Secure Access process see the Secure Access: How to Register for Certain Online Self –Help Tools page on the IRS website.

Preparer Due Diligence Requirement Expansion Reminder

This is a reminder that the preparer due diligence requirements were expanded by the PATH Act last year to include the child tax credit and the American Opportunity education credit as well as the earned income tax credit.  This means that under IRS Code section 6695(g) the IRS has the authority to penalize a tax preparer $510 for each return (and for each credit on that return) for which the preparer fails to comply with the due diligence requirements related to these three credits.

The Four Due Diligence Requirements can be summed up as follows:

• Complete and submit the Form 8867 (Paid Preparers Due Diligence Checklist) whenever the earned income tax credit, child tax credit and/or the American Opportunity Education credit is claimed on a federal return.
  
  
• Complete all necessary worksheets or similar documents showing how each credit was calculated.
  
  
• Knowledge – Know the tax law and ask questions until you have all the information you need to determine eligibility and the correct amount for each of the credits. This means the preparer when evaluating the information provided by the taxpayer should ask additional questions if that information seems incorrect, inconsistent or incomplete. Any additional questions, and the taxpayer’s answers, should be documented and kept with the taxpayer file at the time they are asked.
  
  
• Keep a copy of all of the above, along with a record of how and when you obtained the information to determine eligibility for, and the amount of, the credits. You must also keep a copy of all the documents you reviewed and used to determine eligibility for and the amount of the credits.

It is important to note that preparers need to pay particular attention to meeting the knowledge requirement and be sure that they are asking enough questions to ensure they have enough information to be sure each of these credits is correctly claimed.  Lack of meeting the knowledge requirement is the area where a due diligence penalty is assessed is most cases when the IRS performs a due diligence audit.

For more information, see the Refundable Credit Preparer Due Diligence Law page on the EITC Central website.

For more information on other aspects of due diligence and refundable credits see the following pages on the EITC Central website:

• Due Diligence Training Module 
• Other Refundable Credits Toolkit – Links and information related to child tax credit and the American Opportunity education credit 
• Refundable Credit Frequently Asked Questions 
• Child Related Tax Benefits Comparison 
• Common EITC Questions and Answers 
• What You Need to Know About CTC and ACTC – Information on Child Tax Credit and Additional Child Tax Credit 
• What You Need to Know About AOTC and LLC – Information on the American Opportunity Education Credit and the Lifetime Learning Education Credit 
• Avoiding Common American Opportunity Education credit Errors 
• Preparer Compliance Program – How IRS determines which preparers to conduct a due diligence audit on.