Director of Federal Tax Policy
The Government Accountability Office (GAO) this week added its voice to those calling on Congress to give the IRS the needed authority to require all paid tax preparers to demonstrate basic competence.
While some paid preparers (such as attorneys and certified public accountants) are subject to Treasury Department regulation and must meet professional competency requirements, many others — known as “unenrolled preparers” — aren’t. The GAO pointed out that “in most states, anyone can be an unenrolled preparer regardless of education, experience, or other standards.”
The IRS launched a major compliance initiative in 2010 to require a basic level of competency among paid tax preparers. But, as we explained recently, courts have ruled that the IRS lacks the statutory authority to pursue the initiative. The President has asked Congress to give it that authority.
At a Senate Finance Committee hearing Tuesday, the GAO — Congress’ own watchdog —added its voice to the call for Congress to act:
Providing IRS with the necessary authority for increased oversight of the paid preparer community will help promote high-quality services from paid preparers, will improve voluntary compliance, and will foster taxpayer confidence in the fairness of the tax system.
Committee Chairman Ron Wyden (D-OR) noted that the experience of his state, one of four that regulate paid preparers, underscores the importance of providing such authority:
I’m proud to say my home state gets this issue right. Tax preparers in Oregon study, pass an exam and keep up with the changing landscape of the tax code in order to maintain their licenses, and those standards work. The GAO took a look at the system a few years ago and found that tax returns from Oregon were 72 percent likelier to be accurate than returns from the rest of the country. That puts fewer Oregonians at the mercy of unscrupulous preparers and reduces the risk of the dreaded audit.
These statements echoes similar recommendations from other experts. Nina Olson, the IRS National Taxpayer Advocate, has explained that the IRS initiative can improve compliance in the Earned Income Tax Credit (EITC).
“Unenrolled preparers — those who are neither attorneys, certified public accountants, nor enrolled agents — account for more than three-fourths of EITC returns that are prepared by a paid preparer,” Olson testified in February. Unenrolled preparers not affiliated with a national tax preparation firm “are most prone to error,” she noted: 49 percent of the EITC returns they prepare contain errors that average 33 percent of the amount claimed.
Congress should heed the calls of the President, the IRS, the Taxpayer Advocate, and now its own GAO.