J. Russell George, the Treasury Inspector General for Tax Administration, told a group of tax professionals last week that they can help shape regulations and also curb unethical or illegal activities by unscrupulous preparers.
In a Tuesday speech before the National Association of Tax Professionals, George discussed TIGTA’s independent role in overseeing the IRS and tax preparers and, in turn, the “critical role” preparers can play “in ensuring the continued success of federal tax administration.”
He noted that TIGTA believes that the process taxpayers use to report complaints against preparers is ineffective, as no uniform complaint form is available, and no data base or tracking system has been implemented to monitor the complaints. He said the IRS cannot determine “how many complaints against tax return preparers it receives, how many complaints are investigated, and the total number of multiple complaints filed against a specific preparer or firm.”
TIGTA’s Office of Investigations needs the help of the tax preparer community. The office investigates preparers who overstate their qualifications, preparers who steal clients’ tax payments or tax refunds, and preparers who impersonate IRS employees or misuse the IRS seal or logo, George said.
“Not only are these actions illegal and unethical, but they also severely damage the credibility and reputation of the entire tax preparation community.” He urged the audience to call or e-mail the TIGTA hotline if they suspect misconduct at 1-800-366-4484 or firstname.lastname@example.org.
George also asked the crowd to provide feedback on “what works and what doesn’t” in dealing with the IRS and its rules. “More than half of all taxpayers come to you as tax return preparers to have their taxes prepared and filed. You know what questions they are asking, and you know where the difficulties lie. Your first-hand knowledge and interaction with taxpayers and their concerns provides invaluable insight that is welcomed by our audit teams when it comes to reviewing and making recommendations to the IRS.”
He also talked about the announcement by IRS Commissioner Douglas Shulman that new recommendations would be issued by the end of the year to strengthen ethical standards and increase taxpayer compliance. George noted that in most states anyone can prepare federal income tax returns for a fee, with no national standards for training or experience required. TIGTA has been calling for a system of unique federal ID numbers, to be assigned to each preparer who completes federal tax forms for a fee. Preparers now can use multiple ID numbers (Social Security Number, Employer Identification Number, or Preparer Tax Identification Number, or PTIN), or not record one at all. The IRS doesn’t validate the preparers’ numbers and the data is decentralized among more than 20 different IRS systems, George said.
“Requiring that all preparers use a unique identifying number would allow the IRS, for example, to use the PTIN application process to identify the population of preparers,” he said. He said the IRS has “agreed in principle,” and the ID issue is expected to be part of the IRS commissioner’s recommendations. He noted that the National Taxpayer Advocate and the Government Accountability Office also support the proposal.
George encouraged tax preparers to participate in nationwide IRS town hall meetings, the first of which will be held July 30 in Washington, D.C. The meetings will be held to gather input before Shulman issues his recommendations to Treasury Secretary Timothy Geithner and President Obama.