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In response to a congressional request, GAO reported on the Internal Revenue Service's (IRS) administration of the tax return preparer penalties authorized by the 1976 Tax Reform Act.
Recommendations for Executive Action
|Internal Revenue Service||1. The Commissioner of Internal Revenue should identify and implement the least costly means of collecting needed management information on the preparer population and on preparer penalties, and ensure that the data collected include information on preparers who commit multiple violations over the course of several years.|
|Internal Revenue Service||2. The Commissioner of Internal Revenue should reassess certain IRS compliance approaches and take corrective actions as appropriate. In this regard, he should specifically: (1) determine whether a sizeable group of preparers exists who are not identifying themselves on returns they prepare and have not been detected by the IRS current compliance program; and (2) reevaluate the IRS current nationwide approach to detecting paid preparers who negotiate taxpayers' refund checks.|
|Internal Revenue Service||3. The Commissioner of Internal Revenue should publish guidelines better defining the circumstances under which the willful misconduct penalty ought to be asserted.|
|Internal Revenue Service||4. The Commissioner of Internal Revenue should identify additional means to better ensure that examiners take tax law complexity into account when making penalty assertion decisions.|
|Internal Revenue Service||5. The Commissioner of Internal Revenue should specify that all penalty case files contain information on the type of penalty assessed, the basis for the penalty action, the dollar amounts involved, especially in terms of understated tax liabilities, and the results of supervisory and quality control reviews.|