Most of us don’t do our own tax returns.
My husband did ours for years. He finally surrendered, too frustrated with the never-ending task of keeping up with changes to the tax code. We now pay a professional, and it is money well spent to pass on the aggravation to someone else.
So bravo to those folks skilled and patient enough to prepare their own returns. The rest of us are left to find a competent professional in an industry that is largely unregulated and not watched closely enough by the Internal Revenue Service. But now the IRS is promising greater scrutiny.
Just as the tax season is kicking off, IRS Commissioner Doug Shulman has announced a major initiative that would require paid tax preparers to register with the IRS, be tested for competency and take continuing education courses.
“Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system,” Shulman said during a teleconference.
Of course, there are competent honest preparers — tax professionals, lawyers, certified public accountants and enrolled agents, who are licensed by the federal government to represent taxpayers before the IRS.
But when people are given bad advice or steered to cheat on their tax returns, it means less money for the U.S Treasury and a greater burden on those who pay their share.
As part of the tax preparation initiative, the IRS released a report that I consider a must read. In it, the agency pointed to studies that showed many chain commercial tax-return preparation firms and small, independent businesses, when tested, made huge mistakes on people’s returns. (The report can be found on www.irs.gov.)
In a Government Accountability Office investigation, only two out of 19 tax return preparers reviewed had the correct tax liability and refund amounts.
The U.S. Treasury Inspector General for Tax Administration, or TIGTA, sent its own auditors posing as taxpayers to test paid tax preparers in a major metropolitan area. Eleven out of 16 tax-return preparers who asked the undercover auditors to complete a worksheet produced an incorrect return.
These were not complicated returns subject to interpretation. They covered standard mortgage deductions or education credits or self-employment taxes.
There were some preparers who padded deductions. One completed a return claiming a deduction for charitable contributions even after being specifically told no such contributions were made.
TIGTA has been critical of the way the IRS keeps track of preparers.
IRS data on preparers are stored on 22 different and nonintegrated systems, according to a report released by the inspector general.
The initiatives Shulman announced will take several years to fully implement. In the meantime, the IRS said it is sending letters to about 10,000 paid tax-return preparers who do the type of returns in which the IRS typically sees errors.
Better still, IRS agents posing as taxpayers will be making undercover visits to many of the letter receivers.
This beefed-up oversight is a great idea, but it won’t work if taxpayers don’t do their part.
Here’s what you should keep in mind when getting your tax return prepared:
Don’t pay a preparer a percentage of your refund. Legitimate preparers charge a fee based on the service, not on how much you are getting back.
Make sure the preparer signs your return. Why wouldn’t the person want to admit they helped you with your return? A reputable preparer will sign.
Carefully review your return. I know taxpayers who have paid to have their returns prepared and then never looked at the paperwork. They just signed. You can’t claim ignorance if the IRS catches mistakes or fraudulent information.
Paid tax-return preparers are subject to civil penalties for knowingly preparing a return that understates a person’s tax liability. They are also subject to penalties for failing to sign or provide an identification number on a return they prepare. But if money is owed, it’s you the taxpayer who will get hit and hit hard if caught.
As Shulman said, paying taxes is one of the largest financial transactions people make every year. Having more oversight of the people preparing returns should have long been a priority.
Washington Post Writers Group