Increased IRS Oversight Of Tax Return Preparers Is Coming

by McGrath North Tax Group

(402) 341-3070

This January, the IRS released its six-month study entitled the “IRS Return Preparer Review.”  The IRS found that, in 2007 and 2008, over 80% of all federal tax returns were prepared by either a paid preparer or with the assistance of software.  However, the IRS could not determine the total number of preparers because any person may now prepare a federal tax return for a fee.  The IRS study outlines higher standards to boost confidence in the tax system, increase service and protections for taxpayers, and produce better compliance with tax laws.  The following is a summary of the areas addressed in the study’s recommendations:

  • Mandatory Preparer Registration.  The IRS will require all paid preparers to register with the IRS and receive a preparer tax identification number.  In addition, preparers will be subject to a tax compliance check, in which the IRS will ensure that preparers have personally filed federal personal, business, and employment tax returns and that the tax due on those returns has been paid.
  • Competency Examination.  The IRS will create a competency exam for all registered preparers, except for CPAs, attorneys, and enrolled agents who are in good standing and active with their applicable licensing agencies.  The IRS further stated that it will not “grandfather” any tax preparers based on a history of their filings.
  • Continuing Education.  The IRS will mandate 15 hours of continuing professional education per year for all prepares who are required to register, except for CPAs, attorneys, and enrolled agents.  The education will include 3 hours of tax law updates and 2 hours of tax preparer ethics.
  • Ethical Standards.  The IRS will extend the Circular 230 rules to all paid preparers, both signing and non-signing.
  • Tax Return Preparer Enforcement.  The IRS will develop a comprehensive enforcement strategy to act against preparers who fail to comply.  The IRS intends to allow substantial collection and examination resources to this return preparer compliance initiative.
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