Knowing the relevant facts is what a tax preparation NYC firm has the responsibility and is called due diligence according to law.
It means that the tax preparer needs to learn all tax laws and makes the business facts accordingly.
To fulfill the due diligence requirements, the tax authorities have defined many rules. By following these rules, the tax preparer gets success in providing the best suitable results for the business.
The Basic Requirements for Due Diligence
While talking about the requirements, the first and foremost requirement is to complete form 8867. Moreover, he also needs to complete a paid preparer’s due diligence checklist. The tax accountant will submit these documents with tax returns, whether e-filed or filed in paper document form.
Also, the accountant needs to complete all the required sheets and retain them in his custody. Although many tax accountants have these worksheets, they use accounting software for preparing these sheets. However, the software does not provide complete results, and you need to incorporate some additional information on these sheets.
The accountants also need to retain the copies of form 8867, due diligence checklist, and all worksheets that are important to claim CTC, AOTC, and EITC, etc.
Some other information is also required to retain in which all the related documents for preparing form 8867 and tax return files. It is also important to retain all the relevant record that tells us about the whole procedure of collecting information will also be retained. It will help the best tax preparation NYC firmto determine credits, which a business needs to check its eligibility.
Also, the tax preparers need to correct the filing status, and after that, address all the relevant questions.
Time for retaining the relevant documents
According to law, the tax consultants should keep this record for at least three years. This time will start right from the due date for submitting tax returns or from the date when tax returns were filed. In the case of filing paper-based tax returns, the time will start when the business will receive returns.
Due Diligence Practices to follow under law
Submitting the tax returns to the IRS requires to follow due diligence in full spirit. For that, the tax accountants can consider third-party documents. However, they need to provide the reason due to which they consider these documents.
Besides, he cannot ignore any specific fact or figure while developing these documents. He will also conduct inquiries to check the correctness, completeness, and consistency of the facts.
In a case of finding error or omissions in the previously-submitted tax returns, or something that you have not complied with laws, the accountant needs to inform the taxpayer about the consequences, he may face in the case of not correcting the documents.
Although section 10.21 of Circular 230 allows the tax practitioner not to change the incorrect returns, it is the duty of the tax preparation firm in New York not to continue with any error in the subsequent returns.
Another important aspect regarding due diligence is to prohibit conflict of interests.
To avoid this situation, tax preparers need to follow due diligence requirements about conflict of interest.