Unenrolled tax preparers made mistakes on the majority of returns they prepared for undercover Treasury Department auditors, according to a new report.
In February and March of this year, auditors working for the Treasury Inspector General for Tax Administration posed as taxpayers and had 28 tax returns prepared by 12 commercial chains and 16 small, independently owned tax-prep offices. The preparers were not CPAs, enrolled agents, enrolled actuaries or tax attorneys.
TIGTA said they made "substantial errors" and correctly prepared only 11 of the 28 returns. Of the 17 remaining returns, 11 contained mistakes and omissions the auditors considered human errors or misinterpretation of the tax laws. The other six returns contained misstatements and omissions the auditors considered willful or reckless.
TIGTA estimated that if the incorrect returns had been filed, they would have resulted in $12,828 in understated taxes. Seven of the preparers did not exercise due diligence in determining whether the TIGTA auditors were eligible to receive the Earned Income Tax Credit, and two preparers did not provide the required identification numbers on the returns.
The IRS acknowledged that it does not know how many paid preparers exist and cannot determine the full extent of noncompliance and incompetence among practitioners. TIGTA recommended that the IRS develop and require a single identification number to control and monitor all paid preparers. In their response to the report, IRS officials agreed to study the issue and will commission a team to study the feasibility of requiring a single identification number to control and monitor all paid preparers.
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