Missteps that invite the IRS to send correspondence

Not all enforcement triggers come from what was or was not claimed; sometimes, it’s how the return is prepared and filed. When people think about IRS audits or enforcement, they often focus on what was claimed or not claimed on the tax return. But the truth is, sometimes the trigger isn’t what is on the return at all. It’s how that return was prepared and filed.

Preparer responsibilities

IRS rules require tax professionals to make reasonable inquiries if a client’s information is incomplete, inconsistent or questionable. This is more than a best practice; it’s an enforceable standard. Failure to meet due diligence requirements can result in preparer penalties, loss of e-file privileges or referral to the Office of Professional Responsibility.
For example, if a client claims a credit for a dependent but can’t produce the necessary documentation, you can’t simply take their word for it and move on. You must ask follow-up questions and document their responses. The same goes for unusually high deductions, questionable filing statuses or numbers that don’t align with prior-year data.

Pro tip: Document all client interviews and follow-ups in writing. If the IRS questions a return later, your notes can demonstrate that you met your due diligence obligations.

E-filing errors

E-filing is the fastest and most accurate way to file. If a return is rejected and never corrected, the IRS considers it never filed. This can lead to a failure-to-file penalty, which accrues daily and can snowball quickly. The IRS generally gives tax professionals five calendar days to correct and resubmit a rejected return to be considered “timely filed.” Common rejection causes include:

• Mismatched prior-year adjusted gross income (AGI) or PIN
• Incorrect dependent Social Security numbers
• Name mismatches due to recent marriages, divorces or legal name changes
• Technical errors from outdated software

Because many of these issues stem from minor typos, they’re easy to overlook, especially if you assume the submission went through.

Quick tip: Always confirm IRS acceptance before marking a return “filed” in your system. If a rejection comes in, act immediately to correct and resubmit before the deadline.

Incomplete information and missing forms

Filing with missing forms in hopes of “fixing it later” often backfires. A client might be waiting on a late Form 1099 or Schedule K-1 and suggest filing now to avoid a late return penalty. The problem? Many taxpayers never follow through with amending the tax return, leaving the return inaccurate and vulnerable to IRS action.
Worse, if the IRS receives the missing form from a third party before you file the amendment, your client could receive a CP2000 notice with proposed penalties and interest. At that point, your options are more limited.

Pro tip: When possible, wait for all expected documents before filing tax forms or filing for an extension. If you must amend, use Form 1040-X promptly. The IRS generally does not penalize honest amendments made before it initiates enforcement.

Joint liability risks

Married couples filing jointly are both liable for any tax due. If one spouse has debts, part or all of your refund could be taken. This means if one spouse has outstanding debts, such as past-due child support or back taxes, the IRS can take part or all of the joint refund to cover that debt.
This is where injured spouse relief comes in. Filing Form 8379 can protect the nonliable spouse’s share of a joint refund.

Example: If a couple is expecting a $4,000 refund, but one spouse owes $3,000 in back child support, injured spouse relief may allow the IRS to release the nonliable spouse’s portion of the refund instead of applying the full amount to the debt. File Form 8379 with the return. Don't forget to let your client know their refund may be delayed. However, not filing the form would result in the loss of the injured spouse’s portion of the refund.

Pro tip: If your client’s spouse has known debts, discuss injured spouse relief before filing. This proactive step can prevent unpleasant surprises.

Bottom line 

Good filing habits and prompt corrections when mistakes happen will help you and your clients avoid of IRS enforcement. Not every IRS enforcement trigger comes from the numbers on the return; sometimes it’s the process that sets off alarms. By following due diligence rules, confirming e-file acceptance, filing only complete returns and protecting clients from joint liability surprises, you can reduce risk for both you and your clients. When you catch a mistake, act quickly to correct it. If the IRS rejects a return, contact your client to make any corrections needed.