gua: For tax preparers, some IRS oversight

Published: Thursday, January 14, 2010 at 6:01 a.m.
Last Modified: Tuesday, January 12, 2010 at 4:22 p.m.

Most of us don't do our own tax returns.

My husband did ours for years. He finally surrendered, too frustrated with the never-ending task of keeping up with the many changes to the tax code. We now pay a professional, and it is money well spent to pass on the aggravation to someone else.

So bravo (or brava) to those folks skilled and patient enough to prepare their own returns. The rest of us are left to find a competent professional in an industry that is largely unregulated and not watched closely enough by the Internal Revenue Service. But now the IRS is promising greater scrutiny.

Just as the tax season is kicking off, IRS Commissioner Doug Shulman has announced a major initiative that would require paid tax preparers to register with the IRS, be tested for competency and take continuing education courses.

"Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation's tax system," Shulman said during a teleconference.

Of course, there are competent honest preparers - tax professionals, attorneys, certified public accountants and enrolled agents, who are licensed by the federal government to represent taxpayers before the IRS.

But when people are given bad advice or steered to cheat on their tax returns, it means less money for the U.S Treasury and a greater burden on those who pay their fair share.

As part of the tax preparation initiative, the IRS released a report that I consider a must read. In it, the agency pointed to studies that showed many chain commercial tax-return preparation firms and small, independent businesses, when tested, made huge mistakes on people's returns. (The report can be found on

In a Government Accountability Office investigation, only two out of 19 tax return preparers reviewed had the correct tax liability and refund amounts.

The U.S. Treasury Inspector General for Tax Administration, or TIGTA, sent its own auditors posing as taxpayers to test paid tax preparers in a major metropolitan area. Eleven out of 16 tax-return preparers who asked the undercover auditors to complete a worksheet produced an incorrect return.These were not complicated returns subject to interpretation. They covered standard mortgage deductions or education credits or self-employment taxes.

There were some preparers who padded deductions. One completed a return claiming a deduction for charitable contributions even after being specifically told no such contributions were made.

Here's what you should keep in mind when getting your tax return prepared:

Stay away from preparers who claim they can guarantee a large refund without even seeing your financial information.

Don't pay a preparer a percentage of your refund. Legitimate preparers charge a fee based on the service, not on how much you are getting back.

Make sure the preparer signs your return. Why wouldn't the person want to admit they helped you with your return? A reputable preparer will sign.

Carefully review your return. I know taxpayers who have paid to have their returns prepared and then never looked at the paperwork. They just signed. You can't claim ignorance if the IRS catches mistakes or fraudulent information.

Paid tax-return preparers are subject to civil penalties for knowingly preparing a return that understates a person's tax liability. They are also subject to penalties for failing to sign or provide an identification number on a return they prepare. But if money is owed, it's you the taxpayer who will get hit and hit hard if caught.

If you review your return and find the preparer intentionally claimed deductions you didn't have, don't go along with the deceit. Heck, call the IRS and report the preparer. Your identity can be kept confidential.

As Shulman said, paying taxes is one of the largest financial transactions people make every year. Having more oversight of the people preparing returns should have long been a priority.

Write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071, or Listen to Singletary discuss personal finance every Tuesday on NPR's ''Day to Day.'' To hear her reports online go to

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