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Highlights

Despite the importance of paid tax return preparers in helping taxpayers fulfill their obligations, little data exist on the quality of services they provide. Paid preparers include, for example, enrolled agents, who are approved by the Internal Revenue Service (IRS) once they pass an examination on tax matters or demonstrate past IRS employment experience, and unenrolled preparers, who include self-employed individuals and people employed by commercial tax preparation chains. GAO was asked to determine (1) what the characteristics were of tax returns done by paid preparers, (2) what government regulation exists for paid preparers, and (3) what specific issues taxpayers might encounter in using paid preparers. To do its work, GAO analyzed IRS data, reviewed paid preparer regulatory requirements, and had tax returns prepared at 19 outlets of several tax preparation chains.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Internal Revenue Service 1. The Commissioner of Internal Revenue should conduct necessary research to determine the extent to which paid preparers live up to their responsibility to file accurate and complete tax returns based on information they obtain from their customers. In conducting this research, the Commissioner should consider whether the methodology we used would provide IRS with a more complete understanding of paid preparers' performance.
Closed - Implemented
Beginning in June 2009, IRS conducted a Return Preparer Review to identify issues in the tax return preparer community. IRS solicited input from GAO, tax return preparers, consumer advocacy groups, and the public. In January 2010, IRS announced completion of that review and the beginning of several initiatives to strengthen the competency of tax return preparers and IRS oversight of the preparer community. Included in these efforts have been undercover visits to paid preparers by IRS agents posing as taxpayers. IRS has described these stepped up enforcement efforts during the 2010 filing season as elements of a longer-term effort to improve the oversight of the paid preparer community.

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