IRS to Crack Down on Tax Return Preparers
by Terri Eyden on
By Ken Berry
The Treasury Inspector General for Tax Administration (TIGTA) says the IRS has to do a better job of policing paid tax return preparers. And the IRS – which has been under fire on numerous other fronts – agrees with this assessment. It intends to follow the recommendations laid out by TIGTA in a new report (TIGTA Ref. No. 2013-30-075).
The report from TIGTA, requested by the IRS Oversight Board, examined IRS supervision of unenrolled tax return preparers. The main purpose was to determine if the IRS is effectively enforcing and applying penalties to tax practitioners as required by Internal Revenue Code Section 6694. This tax law provision imposes penalties on paid preparers who take unreasonable positions or intentionally prepare inaccurate returns for clients.
TIGTA reviewed 98 out of 2,345 cases showing penalties totaling $9.35 million from 2009 through 2011. In eight of the cases, the immediate supervisors didn't properly approve $19,000 in preparer penalty assessments as required by law. No Section 6694 penalty can be assessed unless an initial determination is personally approved in writing by an immediate supervisor.
Such failures could potentially doom IRS efforts to litigate penalty assessments in court. When the IRS was notified of this issue, it initiated immediate corrective actions that emphasize the need to properly approve, in writing, penalty assessments for paid tax return preparers.
TIGTA also reviewed the procedures for determining if tax return preparer penalties were being properly evaluated and documented. It found that the cases weren't always adequately documented by the facts supporting the IRS' position. This could result in a conclusion that IRS managers aren't adhering to the documentation requirements in such cases.
Finally, TIGTA analyzed the Master File to determine if the IRS is effectively enforcing paid preparer penalties. It found that the IRS isn't treating this issue as a top priority, so it often goes by the wayside. Without increasing its emphasis on policing tax return preparers, TIGTA says it's unlikely the IRS can change its behavior and increase voluntary compliance.
In summary, the new report advises the IRS to update its manual to improve procedures for documenting actions in paid preparer penalty case files. TIGTA also recommends the IRS develop procedures to expedite assigning accounts to case workers as well as giving more consideration before suspending collection actions on these types of accounts.
IRS officials agreed with all of TIGTA's recommendations. The IRS says it's putting corrective actions in motion. Tax return preparers should be aware that there's a new sheriff in town.
- IRS Continues to Check Up on Tax Return Preparers
- IRS Outlines Ambitious Plan to Regulate Tax Return Preparers
You may like these other stories...
Business tax executives seem to agree with a majority of congressional lawmakers that tax reform is unlikely to happen this year.According to the 2014 Tax Policy Forecast Survey, which was released today by Washington, DC-...
By now, it’s pretty clear that it’s not about the money for former NFL players Hunter Hillenmeyer and Jeff Saturday.After tax authorities in Cleveland, Ohio, applied what the athletes said was unfair taxation...
Camp to Obama: Let’s talkHouse Ways and Means Committee Chairman Dave Camp (R-MI) said on March 6 there are some areas in his proposal to overhaul the tax code where he thinks he can work with President Obama, Bernie...
Upcoming CPE Webinars
BAR is an acronym for: Boundaries, Authority and Role. This simple tool will provide participants with a solid understanding of leadership essentials to improve their performance.
This material is designed to provide a start-to-finish overview of how to plan and complete high-quality small audits efficiently.
In this session Excel expert David H. Ringstrom, CPA shares numerous techniques that you can use to work with charts more efficiently.
Key Accounting and Reporting Issues for Nonprofits No. 1: Overview and Statement of Financial Position
This material focuses on non-profit organizations organization, accounting and reporting.