Tax Attic

Jerry Coon
Jerry Coon

The Michigan Chapter of the National Association of Tax Professionals holds its annual state-wide convention in May after the end of the tax season. Last week, one hundred and ten tax professionals made the trek for the convention to the Eagle Crest Marriott in Ypsilanti/Ann Arbor. It’s always interesting to talk to other preparers and compare notes regarding the recently completed tax season. It’s always good to see friends of many years and to note they are still walking, talking, and able to take nourishment after another grueling tax season. Not one of us has figured out how to keep from getting a year older. We might have figured out how to deal with getting a year older just not how to stop the affect of that additional year from happening. Most said it was a late starting tax season. Normally we start e-filing returns on January 16. This year, the Internal Revenue Service didn’t accept returns until January 30. Due to recent adverse publicity, we might now think that perhaps it was because they had shifted manpower from the returns processing unit over to the non-profit applications processing unit. Even on January 30, they only accepted a limited number of returns. Most returns couldn’t be filed until late February or well into March. In addition, in an effort to keep from filing a string of corrected statements, many financial companies, such as Edward D. Jones and Merrill Lynch elected to ask for and received permission from the IRS to delay sending out their initial brokerage statements. The net result is that many preparation firms like Action Tax Service saw an increased level of activity the closer it got to April 15. That is not how the tax season usually develops. The further net result, and this seems to have happened across the state, is that more extensions were filed this year than in previous years. April 15 just got here too fast this year. As the saying goes, better luck next year!

The Chapter always imports at least one talented tax speaker from out-of-state to come to this convention and this year was no exception. We do have a number of great speakers who are based in Michigan but it’s always nice, from time to time, to hear an instructor from out-of-state. My definition of “talented tax speaker” when it comes to the topic of income tax means he/she is able to make a topic in the realm of income tax interesting enough to keep seasoned, veteran, knowledgeable tax professionals in their seats for an extended period of time. It’s hard but the good ones make it look easy. We had a good one this time, too. Kevin Huston, an Enrolled Agent and president of Blue Ridge Tax Advisors in Asheville, North Carolina kept the crowd involved and learning. Over two days, Kevin taught a number of topics including Retirement Income, Net Operating Losses, Form 8949 and Schedule D-Capital Gains/Losses, Form 4797-Treatment and Sale of Business Assets, and my personal favorite, a topic Kevin calls “Ethics Jeopardy”. All tax professionals are required to annually take at least two hours of continuing education in the area of Ethics. Believe me when I say Ethics can be as dry as maple leaves in November or as interesting as a Red Wings/Blackhawks play-off hockey game. I have seen it both ways but Kevin makes Ethics interesting. He separates the crowd into two sections and they play a game of Jeopardy. Each side gets to choose a question worth from 100 to 500 points. If that side misses the answer, the other side gets to answer and can steal the points. It was a very competitive game. Both sides had a great time and gleaned some information that was applicable to each of us. Several of the questions involved items dealt with daily by tax professionals such as taxpayer privacy issues. Other questions helped to define what constitutes return tax preparer fraud and improper tax preparation.

The taxpayer privacy issues are extremely important. Tax professionals are not allowed to share information with third parties, such as financial or banking institutions, regardless of the reason, without prior written approval from the taxpayer. On a joint return, both taxpayers must give permission to share the information. Kevin recommends having a very specific written approval form that must be signed before sending a client’s tax return to any financial or banking institution. Most lending institutions have an authorization form that is routinely signed by the taxpayers when applying for a loan.

However, that authorization form does not usually have the specific language required to comply with IRS’ privacy rules. Of course, the return can always be given to the taxpayer and the taxpayer can deliver it to the financial or banking institution. Don’t be surprised if your tax professional won’t release your private tax information to your loan officer without you signing another release form. The issue of tax preparer fraud and improper tax preparation is an important one today. Some preparers, and I use that term loosely, know enough of the rules to prepare fraudulent returns. From time to time, those preparers end up in jail but until they get caught and sentenced, they can give all preparers a bad name. Kevin gave several examples of ways that returns can be fraudulently or improperly prepared. The first example entailed a preparer fraudulently creating wage or self-employment income and improperly including that income on a return in order to claim large amounts of refundable credits such as the Earned Income Tax Credit, the American Opportunity Tax Credit, and the Child Tax Credit. The preparer, typically, then also illegally splits the refund in some manner with the taxpayer. The second example involves claiming a refundable credit such as the fuel tax credit for off-road highway business use when the taxpayer actually doesn’t have any off-road highway business use. Again, the preparer usually splits the refund with the taxpayer. It’s all illegal, of course. These are both examples of preparers using false or inflated income and expenses to create illegal refunds. It pays to follow the rules and Kevin gave us some great information. This is Jerry Coon signing off.


Jerry Coon is an Enrolled Agent and

a Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr. in Rockford.

Contact Jerry through his website:

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