IRS Criticized For Failing To Police Tax Preparation Industry
by Leroy Baker, Tax-News.com, New York
13 November 2003

According to the findings of a recent investigation conducted by the General Accounting Office, set to be released this week, the IRS has imposed some $2.4 million in fines against tax preparers in the last two years, but has collected just a fraction of the amount due.

According to an Associated Press report, the GAO’s figures reveal that a mere $291,000 of the total imposed in fines has been collected by the IRS, and that less than half of the tax preparers who were penalized by the Revenue paid anything at all towards their debt.

This has led to calls from the Senate Finance Committee for the IRS to devote more resources to policing the tax preparation industry, given that more than half of US taxpayers now use a paid preparer.

"Clearly people benefit from paid preparers, but there are some bad apples in the bunch," Sen. Charles E. Grassley (R-Iowa), chairman of the committee observed. "The IRS and Congress need to do more to make sure the bad apples are tossed out of the basket."

Illustrating the point, Les Shapiro, a former head of the old IRS Office of Director of Practice, revealed that many tax preparers are able set up businesses with little or no formal education in tax law. This can lead to taxpayers paying the IRS too much or too little, which increases the possibility of an investigation by the Revenue.

Tax officials meanwhile sought to defend their record in this area, arguing that the IRS cannot afford to move more resources to the "low-dollar paid-preparer cases...given their responsibility for addressing billions of dollars in uncollected taxes."

However, according to the AP report, the GAO’s report suggests that by turning a blind eye to the misdemeanours committed by tax preparers, the government is sending a "mixed message about whether poor performance by preparers will be tolerated."

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