Improving Accuracy of Paid Tax-Return Preparers
Paid tax-return preparers play a critical role in helping taxpayers meet their tax obligations; however, paid preparers do not always perform this role well. Improving paid preparers' performance could help reduce the $345 billion gross annual tax gap—the difference between taxes voluntarily paid on time and what should have been paid under the law. Even a small improvement in the accuracy of paid-preparer tax returns could increase federal tax collections by billions or tens of billions of dollars annually.
GAO has suggested several matters for Congress to consider and made recommendations to the Internal Revenue Service related to paid preparers, including the following:
- The Commissioner of the Internal Revenue Service (IRS) should conduct necessary research to determine the extent to which paid preparers live up to their responsibility to file accurate and complete tax returns based on information they obtain from their customers. In conducting this research, the Commissioner should consider whether the methodology GAO used in a 2006 review of paid preparers' performance would provide IRS with a more complete understanding of paid preparers' performance.
- The Commissioner of Internal Revenue should develop a plan to require a single identification number for paid preparers, including the feasibility of options, benefits, and costs of those options, as well as their usefulness for enforcement and research on paid-preparer behavior.
- If Congress judges that the Oregon paid-preparer regulatory regime is likely to account for at least a modest portion of the higher accuracy of Oregon federal tax returns, it should consider adopting a similar regime nationwide. If Congress enacts national paid-preparer legislation, it should also require IRS to evaluate its effectiveness.
IRS has begun some research on the extent to which preparers live up to their obligations but has not completed research fully responsive to GAO's recommendation. IRS did not comment on GAO's recommendation regarding developing a plan to require better identification of paid tax-return preparers and has not implemented the recommendation. No legislative changes have been made regarding the regulation of all paid tax-return preparers.
^ Back to topKey Reports
- Tax Preparers: Oregon's Regulatory Regime May Lead to Improved Federal Tax Return Accuracy and Provides a Possible Model for National Regulation
- GAO-08-781, August 15, 2008
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 41 pages) Accessible Text Recommendations (HTML)
- Internal Revenue Service: Fiscal Year 2009 Budget Request and Interim Performance Results of IRS's 2008 Tax Filing Season
- GAO-08-567, March 13, 2008
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 63 pages) Accessible Text Recommendations (HTML)
- Paid Tax Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors
- GAO-06-563T, April 4, 2006
- Summary (HTML) Highlights Page (PDF) Full Report (PDF, 37 pages) Accessible Text Recommendations (HTML)
