TaxWorks is excited to announce the following enhancements for our 2010 professional tax software program:

These changes are primarily a result of IRS’ increased efforts in monitoring and enforcing compliance of paid preparer due diligence requirements. (Reference IRS e-file QuickAlert below.)

In 2008, the IRS sponsored a Software Developers working group to determine best practices when developing EITC modules in tax preparation software. Several best practices were suggested. Most of the companies agreed to implement the changes.

The major changes based on these best practices are:
1. Form 8867 inputs must be completed before the software will calculate EIC on any return.
2. Form 8867 questions in the software cannot be defaulted.
3. Diagnostic audits will be generated in order to help the preparer complete Form 8867 questions.
4. The grid to document additional questions and taxpayer responses, as well as how, when, and from whom the information regarding EITC is obtained, has been enhanced and will generate a separate record sheet in the output.
5. Trigger audits have been placed in the program to help the preparer know when additional questions should be asked of the taxpayer.
6. A comprehensive Knowledgebase document has been created to provide information on the changes to the program, why they were made, and examples of scenarios where the preparer is obligated to ask additional questions of the taxpayer/client. (See link below to access.)
7. The dependent grid has been modified to include all of Form 8867 questions related to dependents in order to streamline data entry.

We realize that the above changes make the process of generating an EITC return a little more time consuming. However, in light of the IRS focus, these changes are very good and will help the paid preparer comply with the EITC due diligence requirements.

For additional information, please refer to the following links:
IRS article
Program Knowledgebase Document

As you may know, the Treasury Department and IRS released final 7216 regulations January 2008. These regulations impose relatively stringent limitations on a tax preparer’s ability to use or disclose tax return information for purposes other than preparing the tax return. The final regulations are applicable to the use and disclosure of tax return information occurring on or after January 1, 2009. The regulations prescribe a criminal penalty which could result in imprisonment and fines.

The TaxWorks product assists in complying with the 7216 regulations by providing the following procedures and forms:

Bank Products

Consent to Use Tax Return Information
Pursuant to 7216 regulations (see Reg. 7216, Rev. Proc . 2008-35), BEFORE offering a bank product taxpayer(s) must give consent and sign and date a ‘Consent to Use Tax Return Information’ document.

In the TaxWorks product, after selecting the ‘BANK-Bank Apps’ input screen, a new Consent to Use pop-up screen will be presented. You must indicate that consent was or was not obtained from the taxpayer(s). If the taxpayer(s) consent, move the radio button to ‘Yes’. Click the ‘Print Consent to Use Form’ button and obtain taxpayer(s) signatures. After obtaining signatures click the ‘Proceed to Bank Application Screen’ button.

If consent is not obtained from the taxpayer(s), move the radio button to ‘No’ and click the ‘Close’ button. The option to offer bank products will not be allowed, and the software will not proceed to the ‘BANK-Bank Apps’ input screen.

Consent to Disclose Tax Return Information
After consent to use tax return information procedures are completed, a bank product can be offered. The taxpayer(s) must also consent, sign and date a ‘Consent to Disclose Tax Return Information’ document in order to share the tax return information with the applicable lending bank. This must be done before the return can be e-filed and passed to the bank.

After clicking the ‘Proceed to Bank Application Screen’ button, the Bank Application input screen will be displayed. If the taxpayer(s) consent to disclose their tax return information in order to obtain a bank product, click the ‘Print Consent to Disclose’ link and obtain taxpayer(s) signatures. Check the ‘Yes’ box, indicating the taxpayer(s) signed the ‘Consent to Disclose Information’ form. These steps must be done in order to obtain a bank product.

Other Products and Services (Non-Bank)
Pursuant to 7216 regulations (see Reg. 7216, Rev. Proc. 2008-35), a Consent to Use Tax Return Information document must be signed and dated by the taxpayer(s)before using tax return information to offer products or services other than tax return preparation.

In addition, if the taxpayer(s) tax return information will be disclosed to a third party, not related to preparing the tax return, a separate Consent to Disclose Information document must be signed and dated by the taxpayer(s) before disclosing the information.

Creating Documents
Within the TaxWorks product, Consent to Use and Consent to Disclose Information documents may be created for use with non-bank products and services. To create these documents, select the Settings menu and then Custom Letters. Create the letters in the Other Letters Category. After the documents have been created, while working in a clients return, select LTR – Instr Ltr from the form list. On the Letter input screen move to the Custom Letters - Other Letters section. Select the documents you created from the dropdown list. The documents will print with the return. If you would like the documents to print with ALL returns, set a default by clicking the CTRL +D keys while in the dropdown field.

Please refer to Rev. Proc. 2008-35 for specific language required in the documents. For examples of Consent to Use and Disclose Tax Return Information documents, see Rev. Proc. 2008-35 .

NOTE: The Consent documents must be retained by the tax preparer and a copy must also be provided to the taxpayer(s).