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Increased Tax Preparer Oversight

2010 January 6
by dtolleth

In a press release on 4 January 2010, the IRS outlined plans to step up oversight of tax preparers.  For taxpayers seeking help to prepare their tax returns this is good news. Finding qualified tax preparers will be easier.

Exempted from the new oversight procedures are Enrolled Agents, CPAs, and Attorneys who are already subject to more stringent IRS oversight. Included are a large group of previously unregulated tax preparers who may or may not possess the requisite knowledge to correctly prepare a taxpayer’s return.

IRS Proposes New Registration, Testing and Continuing Education Requirements for Tax Return Preparers Not Already Subject to Oversight

Higher Standards to Boost Protections and Service for Taxpayers,
Increase Confidence in System, Yield Greater Compliance with Tax Laws

WASHINGTON –– The Internal Revenue Service kicked off the 2010 tax filing season today by issuing the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.

To bring immediate help to taxpayers this filing season, the IRS also announced a sweeping new effort to reach tax return preparers with enforcement and education. As part of the outreach effort, the IRS is providing tips to taxpayers to ensure they are working with a reputable tax return preparer.

“As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers,” said IRS Commissioner Doug Shulman. “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.”

Based on the results of the Return Preparer Review released today, the IRS recommends a number of steps that it plans to implement for future filing seasons, including:

Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.
Extending the ethical rules found in Treasury Department Circular 230 — which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS — to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.
Other measures the IRS anticipates taking are highlighted in the 55-page report released today.

Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are currently licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.

First Step: Letters to 10,000 Preparers

The initiatives announced today will take several years to fully implement and will not be in effect for the current 2010 tax season. In the meantime, the IRS is taking immediate action to step up oversight of preparers for the 2010 filing season.

Beginning this week, the IRS is sending letters to approximately 10,000 paid tax return preparers nationwide. These preparers are among those with large volumes of specific tax returns where the IRS typically sees frequent errors. The letters are intended to remind preparers to be vigilant in areas where the errors are frequently found, including Schedule C income and expenses, Schedule A deductions, the Earned Income Tax Credit and the First Time Homebuyer Credit.

Thousands of the preparers who receive these letters will also be visited by IRS Revenue Agents in the coming weeks to discuss their obligations and responsibilities to prepare accurate tax returns. This is part of a broader initiative by the IRS to step up its efforts to ensure paid tax return preparers are assisting clients appropriately. Separately, the IRS will be conducting other compliance and education visits with return preparers on a variety of issues.

In addition, the IRS will more widely use investigative tools during this filing season aimed at determining tax return preparer non-compliance. One of those tools will include visits to return preparers by IRS agents posing as a taxpayer.

During this effort, the IRS will continue to work closely with the Department of Justice to pursue civil or criminal action as appropriate.

Steps Taxpayers Can Take Now to Find a Preparer

In addition to the stepped-up oversight of preparers, Shulman also announced a new outreach effort to help make sure taxpayers choose a reputable preparer this filing season. That’s particularly important because taxpayers are legally responsible for what is on their tax returns — even if those returns are prepared by someone else.

“Taxpayers should protect themselves from unscrupulous preparers,” Shulman said. “There are some simple steps people can take to choose a reputable tax preparer.”

Most tax return preparers are professional, honest and provide excellent service to their clients. Shulman offered the following points for taxpayers to keep in mind when selecting a tax return preparer:

Be wary of tax preparers who claim they can obtain larger refunds than others.
Avoid tax preparers who base their fees on a percentage of the refund.
Use a reputable tax professional who signs the tax return and provides a copy.
Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return.
Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.
More information about choosing a tax return preparer and avoiding fraud can be found in IRS Fact Sheet 2010-03, How to Choose a Tax Preparer and Avoid Tax Fraud.

Taxpayer Advocate Annual Report

2010 January 6
tags:
by dtolleth

Nina Olsen, National Taxpayer Advocate, released her annual report to Congress yesterday.  The Internal Revenue Code requires the National Taxpayer Advocate to submit its report each year and “to identify at least 20 of the most serious problems encountered by taxpayers and to make administrative and legislative recommendations to mitigate those problems . Thus, the statute requires that the report focus on problems and areas in need of improvement.”

At the conclusion of the Executive Summary she writes:

As I see it, the IRS is subject to three diverging forces – increased responsibility for non-core tax administration duties, increasing demand for taxpayer service (including telephone assistance) and declining resources for that demand, and collection policies that mask a laissez faire attitude to taxpayer harm under the guise of “efficiency .” The taxpayer is wedged in the middle of these forces, being pulled in all directions, but never the right one. How the IRS weathers this storm depends on its willingness to candidly reassess its taxpayer service and enforcement strategies and commit to necessary changes, as well as on congressional oversight to ensure that this happens.

The report is chocked full of insightful observations and recommendations about how the IRS can better service taxpayers, improve taxpayer compliance, and how Congress can improve legislation to make administration of how the Treasury and IRS administer the tax collection process.

You make want to take a look at the Executive Summary: Preface, and Highlights. (You must have a copy of Adobe Reader to view this document.)

Identity Theft and the IRS

2009 August 19
Comments Off on Identity Theft and the IRS
by dtolleth

The Internal Revenue Service Office of Privacy, Information Protection, and Data Security Actively supports Taxpayers in their efforts to protect their identities, particularly as this relates to Identity Theft, falsely filed tax returns and other taxpayer information. If you suspect you are a victim of identity theft call

  • IRS Taxpayer Advocate Service at 877-777-4778
  • IRS Identity Protection Specialized Unit at 800-908-4490

Alternately, you may prefer to ask your tax professional to make these calls on your behalf.

The IRS also suggests you file a police report, contact your financial institutions, contaact all three major credit reporting agencies, and the Federal Trade Commission.

Experian

Equifax

Transunion

Federal Trade Commission