The U.S. Senate Committee on Finance held a hearing on “Protecting Taxpayers from Incompetent and Unethical Return Preparers” which had many interesting testimonies, including from IRS Commissioner John Koskinen and James McTigue Jr., director of Strategic Issues for the Government Accountability Office (GAO).
This hearing was a result of the IRS asking Congress to give it authority to regulate tax preparers, which in turn was a result of the courts deciding that the IRS does not have said authority under current law.
GAO’s McTigue testified about the findings of a new study conducted rather clandestinely by the GAO. It seems they went undercover in February to 19 randomly selected tax preparers.
The GAO study based on these site visits to the 19 paid but unregulated tax preparers found that only two of them were able to calculate the correct refund amount.
Refund errors on the part of the other 17 varied from giving the taxpayer $52 less to $3,718 more than the correct refund amount.
Two of the tax preparers even chose the wrong type of tax return. Common tax preparation errors the GAO found among the 17 who ended up with incorrect refund amounts include:-
- Not reporting non-Form W-2 income such as cash tips (12 of 19 made this mistake);
- Claiming EITC for an ineligible child (three of the 10 applicable cases);
Other common errors included tax preparers not asking required eligibility questions for the American Opportunity Tax Credit, and not providing the accurate PTIN (preparer tax identification number).
Oh, and the 19 error-prone tax preparers who were randomly picked to be scapegoats aren’t going to get away with just a mention in a report.
McTigue said in his testimony that “Because the returns we had prepared were not real returns and were not filed, penalties would not apply. However, we plan to refer the matters we encountered to IRS so that any appropriate follow-up actions can be taken.”
Additional testimony in support of legislation to regulate tax preparers was provided by National Taxpayer Advocate Nina E. Olson, who told the Committee that “Given the critical role that preparers play in tax compliance, I believe it is in the best interest of taxpayers and tax administration to establish minimum standards for the profession.”
Others providing testimony at the hearing included William Cobb, President & CEO, H&R Block; Janis Salisbury, Chair, Oregon Board of Tax Practitioners; Dr. John Barrick, Associate Professor, Brigham Young University; Ms. Chi Chi Wu, Staff Attorney, National Consumer Law Center; and Dan Alban, Attorney, Institute for Justice.
Read the full GAO study based on their undercover site visits to tax preparers – Download (pdf)
Photo credit – senate.gov