Popular search terms:

MSP #7: Return Preparer Oversight

The IRS Lacks a Coordinated Approach to Its Oversight of Return Preparers and Does Not Analyze the Impact of Penalties Imposed on Preparers

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #7-1

Invite representatives from TAS to the cross-functional team that was established to develop a coordinated strategy to provide effective oversight of return preparers.

IRS RESPONSE TO RECOMMENDATION: A TAS representative was identified in February 2019 and attended two Service-wide Preparer Strategy team meetings held that month, while a second TAS representative was identified in March. Both representatives are currently participating in ongoing team meetings. As team members, these two representatives will assist in developing the Service-wide strategy and provide input from the Taxpayer Advocate perspective.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We are pleased that the IRS has so promptly adopted our recommendation. We expect that the representatives from TAS will provide a perspective that will help ensure taxpayer rights are protected and taxpayer burden minimized.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

2
2.

TAS RECOMMENDATION #7-2

Develop a comprehensive plan to communicate the coordinated return preparer strategy to Circular 230 preparers and unenrolled preparers.

IRS RESPONSE TO RECOMMENDATION: The Servicewide Preparer Strategy includes an action item to develop a comprehensive communication and outreach strategy.

CORRECTIVE ACTION:The Service-wide Preparer Strategy includes an action item to develop a comprehensive communication and outreach strategy.

Update: The Servicewide Preparer Strategy was developed to provide a coordinated effort in relation to return preparers. This roadmap for using varied and broad communication strategies to inform preparers (as well as taxpayers) is tied to the strategic goals of the SWPS and is designed to encourage compliance and increase transparency by educating the public on issues affecting the preparer community.

TAS RESPONSE: It is our understanding that the Servicewide Preparer Strategy team is tasked with developing a comprehensive communication and outreach strategy, one that will engage both internal and external stakeholders. The National Taxpayer Advocate is pleased that the IRS has committed to this action item and looks forward to being briefed on the comprehensive communication and outreach strategy once it is finalized. However, until this strategy is approved by IRS senior leadership, we do not believe this recommendation should be closed out as implemented.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open):

3
3.

TAS RECOMMENDATION #7-3

Develop a community-based, grassroots communication strategy for educating vulnerable taxpayer populations about how to select a competent return preparer and the risk of return preparer fraud.

IRS RESPONSE TO RECOMMENDATION: Since 2014, the IRS has created multiple messages for the public regarding how to select a competent return preparer and the risks of return preparer fraud. The messages are centrally located at www.irs.gov/chooseataxpro. These include news releases, tax tips, videos, and webpages. Some of our most recent offerings include:

■ News releases IR-2019-32, Choose tax preparers carefully, and IR-2019-09, Don’t be a victim to a “ghost” tax return preparer.
■ Tax Tip 2019-06, Ten things for taxpayers to think about when choosing a tax preparer.
■ Videos entitled “Choose a Tax Preparer Wisely” and “How to Use the Tax Return Preparer Directory.”
■ Web pages on “Understanding Tax Return Preparer Credentials and Qualifications” and the “Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.”

The IRS widely distributes these messages to the media, national tax professional organizations, small business organizations, consumer groups, and state partners. The IRS will work to further expand the reach of these messages to vulnerable taxpayer populations for the next filing season.

CORRECTIVE ACTION:  Since 2014, the IRS has created multiple messages for the public regarding how to select a competent return preparer and the risks of return preparer fraud. The IRS will work to further expand the reach of these messages to vulnerable taxpayer populations for the next filing season.

TAS RESPONSE: The National Taxpayer Advocate appreciates that the IRS has developed content to host on the IRS.gov website. We are concerned that many taxpayers, especially those who may be most susceptible to being victimized by unscrupulous preparers, may not have access to broadband internet or may not be accustomed to going online to get information about taxes.

We recommended that the IRS take a multi-faceted approach to outreach. To ensure it reaches the population in a manner that will be best received, the IRS may want to partner with volunteer organizations, consumer rights groups, local churches, and other community groups. The IRS should explore the feasibility of developing creative public service announcements for TV and radio, as well as for non-traditional social media outlets.

We look forward to learning about the IRS’s expanded approach, and appreciate the IRS committing to implement this recommendation by April 2020.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

4
4.

TAS RECOMMENDATION #7-4

Conduct analysis on the impact of penalty assessments and no-change audits on preparers’ behavior in subsequent years, and publish the findings.

IRS RESPONSE TO RECOMMENDATION: ​Due to the volume of preparers we engage with during our compliance processes, the monitoring of individual preparers’ post audit and post penalty assessment behavior would be cost prohibitive. In addition, we cannot assume a change in a preparer’s behavior is the result of an enforcement action. To know for certain the reason behind a change in a preparer’s behavior would require examinations of the preparer’s clients’ returns. This would be burdensome to the preparer, their clients, and may not represent the most effective use of IRS resources. For this reason, from a cost-benefit perspective, we do not believe this is the best use of limited IRS resources. However, we do analyze data to identify non-compliant preparers and use that analysis in considering and evaluating preparer/promoter investigations and case selection.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We understand IRS resource constraints. We feel it would be worthwhile to invest time and resources into a study on the impact of preparer penalties, in an attempt to learn whether these penalties have an impact at all on behavior. This information would leave the IRS better equipped to decide whether spending resources on assessing these penalties has a positive return on investment, given that only about 15 percent of assessed preparer penalties were actually collected in recent years.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

5
5.

TAS RECOMMENDATION #7-5

Revise letters and notices (including Appeals Letter 3808) that reference the Directory of Federal Tax Return Preparers to ensure that appropriate caveats are clearly articulated.

IRS RESPONSE TO RECOMMENDATION: In an effort to help taxpayers in responding to IRS correspondence, certain letters have been updated to include individuals and organizations that are independent from the IRS and which provide taxpayer assistance. These letters include references to Low Income Taxpayer Clinics as well as the Directory of Federal Tax Return Preparers (Directory). This searchable Directory is intended to help taxpayers by providing a listing of preparers in their area who currently hold professional credentials recognized by the IRS or who hold an Annual Filing Season Program Record of Completion.

Tax return preparers have differing levels of skills, education, and expertise. The landing page for the Directory provides very specific definitions of what the various categories of preparers can do. These definitions were negotiated with the stakeholder community at length to ensure their accuracy and clarity. There is no one included in the Directory who does not have some representation rights.

The Directory landing page also includes a link to information on “Understanding Tax Return Preparer Credentials and Qualifications,” which provides taxpayers with detailed descriptions of the different types of tax professionals, including licensing requirements and representation authority. We believe the information provided with the Directory is sufficient to allow taxpayers to make an informed decision. In addition, trying to include this granularity of detail regarding return preparer authorities within the letters themselves is not suitable for plain language notice writing and could lead to taxpayer confusion.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We contended that it is misleading and potentially harmful for the IRS to reference the Directory of Federal Tax Return Preparers without explaining the potential limited representation authorities of such preparers. The IRS responded that there is a link located on the Directory landing page that contains a description of the different types of tax professionals. We find this response to be inadequate and in violation of the taxpayers’ right to be informed and right to quality service. To the extent that the IRS is able to identify which letters should be modified to include the explanatory language when referring to the Directory of Federal Tax Return Preparers, it should do so.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

en English
X