IRS Update: EITC Warning Letters and Self-Employed Deductibility of Medicare Premiums

IRS Warning Letters for Tax Preparers Who Did Not Submit Form 8867 with EITC Returns

Beginning this filing season the Internal Revenue Service (IRS) requires that any tax return claiming EITC that is completed by a paid preparer must have the Form 8867 (Paid Preparer’s EIC Checklist) attached to it. The failure to comply with this requirement means that the paid preparer is not meeting their due diligence requirements and is therefore subject to a $500 penalty for each tax return that does not have Form 8867 attached to it.

The IRS has begun sending out warning letters to preparers who have submitted Tax Year 2011 EITC tax returns without attaching Form 8867. This letter warns the preparer that they did not meet their due diligence requirements in 2012. The IRS will not assess any penalties for the 2012 Filing Season. Click here to read more.

Self-Employed Taxpayers Can Deduct Medicare Premiums

The IRS Office of Chief Council has advised IRS attorneys that self-employed taxpayers may deduct Medicare premiums when calculating the self-employed health insurance deduction on Form 1040, line 29.

This reverses the IRS stance held before 2010 when the IRS stated that self-employed taxpayers could not include any Medicare premiums in the self-employed health insurance deduction. This decision also expands what the IRS permitted in 2011, allowing self-employed taxpayers to include only Medicare Part B premiums when calculating the self-employed health insurance deduction.

Click here or to read the entire CrossLink Tax Update that includes further information on EITC Warning Letters and Self-Employed Deductibility of Medicare premiums.

IRS Update: Revised IRS Procedures for Issuing ITINs

The IRS has announced that they will no longer accept notarized copies of the 13 acceptable documents that show proof of identity and foreign status when applying for an Individual Taxpayer Identification Number (ITIN) for the remainder of 2012.

The IRS will now only issue an ITIN when the application includes the original of the following documents:

• Passport
• US driver's license
• US military identification card
• National identification card
• Click here to read more.

Each document must be current and contain an expiration date. They also must show your name, photograph, and support your claim of foreign status.

If a certified acceptance agent is used, either original documentation or copies of original documentation certified by the issuing agency must be attached to the ITIN application.

Click here to read the entire CrossLink Tax Update that includes further information on the revised IRS procedures for issuing ITINs.