Two recent reports suggest that the movement to register tax return preparers will continue.

Within a week of a Treasury Inspector General for Tax Administration report highlighting the failures of unenrolled preparers during the 2008 tax season, the Government Accountability Office released a report in praise of Oregon's new regulatory regime for tax preparers, suggesting that it provides a possible model for national regulation.

"This is not a coincidence," said Beanna J. Whitlock, executive director of the National Society of Tax Professionals and former director of the IRS Office of National Public Liaison. "There's no question about it. This has surfaced about six or seven times and I think the return preparer community is expecting it."

The TIGTA report, titled Most Tax Returns Prepared by a Limited Sample of Unenrolled Preparers Contained Significant Errors, was based on a sample of 28 returns prepared in February and March 2008 at 12 commercial chain and 16 small, independently owned tax preparation offices. Auditors paid commercial chains approximately $234 per return, and independently owned offices approximately $132 per return.

Auditors developed five scenarios with income ranging from $16,000 to $85,000, and with three filing statuses: single, married filing jointly, or head of household. The review was performed in a large metropolitan city, unnamed to protect the anonymity of the auditors and the paid preparers visited.

During the review, preparers correctly prepared 11, or 39 percent, of the 28 returns. However, 17 tax returns, or 61 percent of the sample, were prepared incorrectly. If the tax returns had been filed, the net effect would have been $12,828 in understatements. All preparers in the study used commercial tax preparation software to preparer the tax returns.

Preparers did not prepare any of the six business income and expense tax returns correctly. They either added or increased deductions without the auditors' permission, and in some situations after the auditors had questioned whether they were entitled to the deductions. The six preparers whose actions were considered willful or reckless prepared almost 1,000 tax returns during the 2008 filing season.

The use of information worksheets didn't result in a big improvement in results. For 16 of the 28 visits, preparers asked the auditors to complete an information worksheet. However, only five of these instances when information worksheets were completed resulted in correctly prepared tax returns.

TIGTA recommended that the commissioner of the IRS Small Business/Self-Employed Division develop and require a single identification number to control and monitor all paid preparers.

"We've been preaching about this for years," said Paul Cinquemani, a CPA and director of government relations for the National Association of Tax Professionals. "Why not register people and find out who's good and who's bad?"

There are currently two bills before Congress that would register tax preparers, one in the House and one in the Senate.

"There's no reason not to be in favor of registration," said Cinquemani. "The IRS estimates there are 1.2 million paid preparers, but there's no way to really be sure. A preparer can use the employer's ID number, or someone else's [preparer tax identification number], so it's hard to know exactly who or how many there actually are."

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