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MSP #6: RETURN PREPARER STRATEGY

The IRS Lacks a Comprehensive Servicewide Return Preparer Strategy

TAS Recommendations and IRS Responses

1
1.

TAS RECOMMENDATION #6-1

The National Taxpayer Advocate recommends that the IRS develop a comprehensive servicewide return preparer strategy that:
1. References the taxpayer’s right to retain representation in the mission of the strategy.

IRS RESPONSE TO RECOMMENDATION: The taxpayer’s right to retain representation is a fundamental right for all taxpayers under the Taxpayer Bill of Rights; therefore, it is not necessary to address as a separate item in the return preparer strategy.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We continue to recommend that the IRS prominently reference the taxpayer’s right to retain representation in the SWPS. This reference, ideally in the mission statement, will serve as a reminder to all IRS employees who implement this strategy of the need to protect this fundamental taxpayer right even as they address potential preparer noncompliance.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

2
2.

TAS RECOMMENDATION #6-2

2. Increases preparer competency through outreach and education to preparers before any detection of noncompliance.

IRS RESPONSE TO RECOMMENDATION: The IRS will continue to address preparer competency. Outreach and education for preparers is ongoing and is provided through various avenues, such as the National Tax Forums, Stakeholder Liaison efforts, meetings with professional associations and various industry stakeholders, webinars, and a wealth of resources on IRS.gov, including a Tax Preparer Toolkit that provides resources and continuing education opportunities for preparers. The IRS also sends eNews articles, Quick Alerts, and social media messages to tax practitioners whenever new tax legislation is passed and implemented. The IRS continually engages with our tax professional partners through the Refundable Credit Summits and the Software Developers Working Group to share information and discuss challenges and lessons learned within the preparer community, with the goal of improving the quality of tax returns filed claiming refundable credits and other benefits. These activities will continue as part of the overall return preparer strategy.

CORRECTIVE ACTION: N/A

TAS RESPONSE: 
While the preparer and taxpayer outreach and education mentioned by the IRS is important, the IRS should explore other ways it can increase preparer competency within its authority. For example, the strategy could include a goal to increase participation in the Annual Filing Season Program.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

3
3.

TAS RECOMMENDATION #6-3

3. Requires disclosure of fees charged in connection with the preparation and filing of tax returns and enforce such requirements.

IRS RESPONSE TO RECOMMENDATION: The IRS does not have authority to impose or enforce a requirement to disclose fees charged in connection with the preparation and filing of tax returns.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Considering the significant burden imposed on taxpayers by the lack of transparency in fees charged by many preparers, as discussed in the MSP, the IRS should work with the Office of Chief Counsel to determine if it has the authority to impose and enforce fee disclosure requirements on preparers.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

4
4.

TAS RECOMMENDATION #6-4

4. Includes a comprehensive public education campaign, particularly to low-income and other taxpayer populations that are vulnerable to unskilled and unethical preparers. Such a campaign should provide information to taxpayers about preparer roles, responsibilities, requirements, and reporting misconduct.

IRS RESPONSE TO RECOMMENDATION: Each year, the IRS hosts an annual “EITC Awareness Day,” which is a nationwide effort to provide taxpayers more information about the Earned Income Tax Credit (EITC) through traditional and social media channels and to promote use of the EITC Assistant on IRS.gov. The 14th EITC Awareness Day was held on January 31, 2020. Using available communication resources to reach the broadest range of taxpayers, the annual EITC Awareness Day News Release informs the tax community where they can find information regarding the Free-File, Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly (TCE) programs. In addition, news releases inform the tax community how to choose a paid preparer and include instructions on how to report unscrupulous preparers. This information is also available on IRS.gov.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Based on the IRS response, existing IRS communications, especially those associated with EITC Awareness Day, amount to the recommended comprehensive public education campaign.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

5
5.

TAS RECOMMENDATION #6-5

5. Limits access to confidential taxpayer information through online applications to only those preparers over whom the IRS has oversight authority.

IRS RESPONSE TO RECOMMENDATION: The Office of Professional Responsibility’s (OPR’s) standard operating procedures and electronic case management systems already limit access to confidential taxpayer information to only those preparers over whom the OPR has oversight authority through Circular 230. The future online account application for tax professionals is being evaluated by Online Services (OLS). Discussions regarding implementation and funding are ongoing.

CORRECTIVE ACTION: N/A

TAS RESPONSE: We look forward to working with OLS as it continues to plan the implementation of the tax professional online application.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Partially Adopted

OPEN or CLOSED: Closed

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

6
6.

TAS RECOMMENDATION #6-6

6. Routinely tracks preparer noncompliance data by type of designation.

IRS RESPONSE TO RECOMMENDATION: The IRS does not track preparer noncompliance data by type of designation for several reasons. The designation in the Preparer Tax Identification Number (PTIN) system is self-reported and not always accurate regarding preparer type. In addition, preparer designations change and expire, and some preparers hold multiple designations. Finally, the IRS has seen no evidence that tracking noncompliance by type of designation will impact overall noncompliance. However, the IRS does analyze preparer data to identify non-compliance and to determine the appropriate enforcement approach.

CORRECTIVE ACTION: N/A

TAS RESPONSE: While data on noncompliance by preparer designation may be imprecise due to the reasons cited by the  IRS, maintaining and analyzing this data would still prove useful.   Tracking noncompliance by preparer    type could identify trends and enable the IRS to provide outreach and education as well as compliance treatments in a more targeted manner.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

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

7
7.

TAS RECOMMENDATION #6-7

7. Collaborates with TAS in the development of the comprehensive servicewide return preparer strategy.

IRS RESPONSE TO RECOMMENDATION: TAS is currently represented on the return preparer strategy team.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS looks forward to continued participation on the SWPS team.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

8
8.

TAS RECOMMENDATION #6-8

8. Incorporates service to return preparers into the comprehensive taxpayer service strategy mandated by the Taxpayer First Act, because return preparers are customers of the IRS and important vehicles of taxpayer compliance.

IRS RESPONSE TO RECOMMENDATION: The IRS is taking a holistic approach to developing the comprehensive taxpayer service strategy mandated by the Taxpayer First Act. This approach includes consideration of tax professionals in their dual roles as customers of IRS services and service providers to their clients (taxpayers). The Taxpayer First Act Office will continue to look for opportunities to grow and strengthen trusted partnerships with the tax professional community and their comprehensive taxpayer service strategy will be detailed in the written report to Congress required by section 1101 of the Taxpayer First Act.

CORRECTIVE ACTION: N/A

TAS RESPONSE: Considering the important role preparers play in the tax system, it is crucial that the IRS Comprehensive Customer Service Strategy addresses service to preparers. As a result, coordination of the SWPS with the service strategy is essential.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

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

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