AICPA Comes Out Against Tax Preparation Cost Estimates

The American Institute of Certified Public Accountants (AICPA) is urging the Internal Revenue Service (IRS) not to include the tax preparer cost estimate in the 2006 Form 1040 instructions. This is not the first time the AICPA has expressed reservations regarding this issue.

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The IRS is required to disclose information regarding the taxpayer burden. The AICPA does not dispute whether the information should be collected and made public. Rather, they question how the IRS has chosen to communicate that information in the past. The primary concern is that because the costs of preparing a tax return vary significantly, depending on a variety of factors, from complexity to geographic location, to the type of preparer, the information the IRS provides can easily be misunderstood.

In a comment letter sent to IRS Commissioner Mark Everson, the AICPA commends the IRS for improving the clarity of the information published in the 2005 Form 1040 instructions. The Notice published in the Federal Register also demonstrated increased clarity.

“As we did last year, we question whether there is any practical utility in including tax return preparation cost estimates with the 2006 Form 1040 instructions. Even if one assumes the Service’s estimation process is technically accurate, we continue to believe that the proposed cost estimates lack clarity and context when presented as part of the Form 1040 instruction burden chart,” the AICPA states. “Thus, the cost estimates are likely to prove problematic and misleading to taxpayers and tax professionals, even when taking into account the improved narrative provided for in the August 3 Federal Register notice. The AICPA recommends, therefore, that the service not include any tax return preparation cost estimates in the 2006 Form 1040 instructions.”

Listen to tips for responding to client inquiries about this issue:

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