Wednesday, April 6, 2011

IRS Must Document Framework For Enhanced Paid Tax Preparer Requirements

IRS must still document its framework for using enhanced paid tax preparer requirements to improve taxpayer compliance, the Government Accountability Office (GAO) said in a report released on March 31. (GAO-11-336) Paid tax preparers handle some 60% of all tax returns filed. As described by GAO, the new requirements for paid preparers include obtaining a preparer tax identification number (PTIN) and implementing both competency testing and continuing education requirements. In addition, the agency plans to require paid preparers to adhere to standards of practice. The paid preparer requirements are being funded through user fees, GAO noted. IRS identified key costs associated with registration, estimated fixed costs, and based some variable costs on similar registration efforts. However, the report stated that IRS has discussed, but not documented, a framework for ultimately achieving improved taxpayer compliance. For example, the agency plans to develop a comprehensive database containing information on paid preparers and related tax returns. “Without a documented framework, IRS may have difficulty (1) assessing whether it has adequately planned for what data it needs to collect and (2) deciding how to allocate resources given competing priorities,” GAO said, adding that “a framework could also help assure paid preparers...that IRS will assess whether the requirements provide their intended benefit.” The report is available at

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