The IRS has announced that many US taxpayers who claimed the 2014 Earned Income Tax Credit or EITC may receive a letter from the IRS questioning their deduction. The IRS has issued a notification that says many taxpayers will receive a 5621 Form Letter, a 5621-A or both, informing them that they were not eligible to claim part of their EITC, and in some cases all of it. This would be a major modification to your tax return, and could generate issues with the IRS including collections or an audit.
Letter 5621 questions whether some or all of the children claimed under your EITC qualified for or met the guidelines of the 2014 Earned Income Tax Credit. Letter 5621-A indicates the IRS has questions as to whether part or all of the income or expenses from self-employment you reported on Schedule C or Schedule C-EZ are complete or correct. The IRS expects those who are self employed to make money in their enterprise.
US tax laws require you to report all income and expenses from all sources for your enterprise on Schedule C including receipts and revenues paid via credit card or paypal which may have been reported on a form 1099-K. The failure to promptly respond to these letters and file appropriately amended returns could lead to an immediate IRS audit, an IRS collection action or both.
If you receive an IRS letter 5621 or 5621-A relating to your 2014 Earned Income Tax Credit you need to pay attention and respond. Allen Barron is uniquely positioned to assist California taxpayers and international tax clients who face challenges with the IRS. We invite you to contact us for a free consultation at 866-631-3470.
