IRS Gives Interim Report on its Scrutiny of Tax Return Preparers
On April 7th, the IRS announced initial results from its stepped-up effort involving enforcement and education to combat unscrupulous tax return preparers so as to protect the nation’s taxpayers. The IRS stated it had conducted more than 5,000 field visits to tax return preparers this fiscal year. Additionally, the IRS has worked with the Department of Justice to pursue questionable return preparers, an effort that has led to 56 indictments, 25 convictions and 21 civil injunctions since Jan. 1, 2010.
The IRS believes that the majority of return preparers provide excellent service to their clients and that only a few unscrupulous tax preparers file false and fraudulent returns to defraud the government and the tax-paying public. To ferret out those preparers the IRS is using investigative tools on a broad basis, including agents posing as taxpayers, to seek out and stop unscrupulous preparers from filing inaccurate returns. The IRS plans on continuing to work closely with the Department of Justice to pursue civil and criminal action as appropriate.
In addition to enforcement efforts, the IRS has implemented educational efforts. In January of this year the IRS sent more than 10,000 letters to tax return preparers. These letters reminded them of their obligation to prepare accurate returns for their clients, reviewed common errors, and outlined the consequences of filing incorrect returns. The letters went to preparers with large volumes of specific tax returns where the IRS typically sees frequent errors. The IRS followed up with field visits to about 2,400 tax return preparers who received these letters to discuss many of the issues mentioned in the letter. Separately, the IRS conducted other compliance and educational visits with return preparers on a variety of other issues. All told, IRS representatives visited more than 5,000 paid preparers to encourage and help them avoid filing incorrect or fraudulent returns for their clients.
The IRS has recently begun to implement a number of steps to increase oversight of federal tax return preparers. This includes proposed regulations that would require paid tax return preparers to obtain and use a preparer tax identification number. Later this year, the IRS will propose additional regulations requiring competency tests and continuing professional education for paid tax return preparers who are not attorneys, certified public accountants and enrolled agents.