Treasury Inspector General for Tax Administration
February 26, 2009
Contact: Robert Sperling
The Treasury Inspector General for Tax Administration (TIGTA) today publicly released two reports regarding the Internal Revenue Service's (IRS) oversight of paid tax preparers.
The reports assessed whether: the IRS's Office of Professional Responsibility (OPR) is taking action against licensed tax practitioners who have employed abusive tax shelters; and whether the process used by taxpayers to report complaints against paid tax preparers is effective.
There are no national standards that a tax return preparer is required to satisfy before selling tax preparation services to taxpayers. Paid preparers wishing to represent taxpayers before the IRS must be licensed as a certified public accountant, attorney, or enrolled agent. These preparers, known as practitioners, are regulated by OPR, which sets and enforces standards of competency, integrity and conduct. The OPR may impose disciplinary actions through private or public reprimand, suspension or debarment.
TIGTA found that IRS divisions are not consistently referring to OPR licensed practitioners who have been assessed penalties, sentenced in a criminal proceeding, or enjoined for tax shelter violations. As a result, these tax practitioners were still eligible to represent taxpayers before the IRS. Taxpayers who use a licensed tax practitioner who has been identified by the IRS for tax shelter violations could face additional taxes, penalties and interest.
"Abusive tax shelters continue to present formidable challenges to the IRS," commented J. Russell George, the Treasury Inspector General for Tax Administration. "The IRS agreed with TIGTA's recommendations to improve its procedures for referring to OPR licensed tax practitioners who have been identified by the IRS for tax shelter violations for appropriate disciplinary action."
In the second report, TIGTA concluded that the IRS cannot determine how many complaints against paid preparers it receives, how many complaints it works, and the total number of multiple complaints against a specific firm or preparer. According to the report, the IRS's guidelines on how to file a complaint are difficult to understand and IRS employees do not consistently provide taxpayers with sufficient information or what information to include in a complaint. As a result, many complaints cannot be investigated.
The IRS does track some complaints filed by taxpayers against tax practitioners (CPA's, attorneys and enrolled agents). Complaints against unlicensed and uncertified preparers are not tracked.
"Paid preparers are a critical component and stakeholder in tax administration, but there are occasions when the need arises for a taxpayer to file a complaint against preparers," George commented. "The IRS's processes for receiving and processing complaints about tax preparers need to be improved."
TIGTA recommended that the IRS improve the guidance provided to taxpayers about the complaint filing process and develop a form, both web-based and paper, for use by taxpayers in filing preparer complaints. The IRS said it would clarify the preparer complaint information posted on its website (www.irs.gov) and agreed to review the complaint process.
To view the reports, including the scope, methodology and IRS response, visit www.tigta.gov.
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