In a limited study, the Government Accountability Office said that paid tax-return preparers at 19 chain operations returned less-than-stellar service.
The GAO has asked the Internal Revenue Service to conduct further research after looking into the characteristics of tax returns most often completed by paid preparers; what government regulations exist for paid preparers; and what specific issues taxpayers might encounter in using paid preparers.
The report says that according to the most recent reliable data, about 56 percent of all the individual tax returns filed for tax year 2002 used a paid preparer, with higher paid preparer usage among taxpayers with more complicated returns, such as those claiming the earned income credit.
As part of the study, staffers posed as taxpayers and asked preparers in a major metropolitan area to prepare federal tax returns under one of two scenarios. No law firms, CPA firms or single-office tax return preparation businesses were involved.
Among the problems:
- Unwarranted extra refunds of up to almost $2,000 were calculated in five instances;
- In two cases, taxpayers lost out on over $1,500;
- Business income was not reported in 10 of 19 cases;
- An ineligible child was claimed for the earned income credit in five out of 10 applicable cases;
- Preparers failed to take the most advantageous post-secondary education tax benefit in three out of nine applicable cases; and,
- Preparers failed to itemize deductions, or failed to claim all available deductions, in seven out of nine applicable cases.
After reviewing the GAO's findings, IRS officials said that many of the preparers would have been subject to penalties for such things as negligence and willful or reckless disregard of tax rules.The full report is available at www.gao.gov/new.items/d06563t.pdf.
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