Most people I talk to about their IRS problem have already built the worst-case scenario in their head. The reality is usually much more manageable. I'm Darrin Mish, and I've been representing taxpayers before the IRS for 32 years. Here's what actually tends to happen.
Guess who thinks the tax code is complex and does not prepare his own tax returns? Doug Shulman, the IRS Commissioner! In a recent interview, Shulman confessed that he engages a professional tax preparer to fill out his tax forms, adding that he has been using one for 10 years.
Shulman’s practice is typical of a whopping majority of American taxpayers, approximately 80% of which do not prepare their own taxes when it comes time to submit their tax forms. This percentage comprises of 60% who engage tax preparers to do the work for them and another 20% who use specialized software instead.
This month, the IRS announced that it is set to enforce certain measures to foster greater competence and integrity in companies and individuals who provide tax preparation services. New regulations are being prepared that would entail tax preparers needing to be registered with the IRS, pass competency examinations and be regularly tested thereafter in order to be certified to prepare tax returns.
This new measure has come in the wake of shocking discoveries by the authorities on the lax and unprofessional work by many tax preparers. In separate investigations conducted by the Government Accountability Office and the US Treasury inspector general for Tax Administration (TIGTA), the conduct of a majority of tax preparers have been found seriously wanting.
For instance, when the Government Accountability Office investigated 19 tax preparers, they found that only 2 could produce correct tax liability and refund amounts in their tax returns. The results of investigations by the TIGTA produced no better results. Its auditors, posing as taxpayers seeking tax preparation services, discovered that 11 out of 16 tax preparers made errors in simple tax returns. Both the Government Accountability Office and TIGTA’s investigations did not involve complex tax issues; rather all of them needed only straightforward and common calculations of things like mortgage deductions, self-employment taxes and education credits.
Worst of all, some tax preparers were willing to cheat on the tax returns they prepared, often without batting an eyelid. Some willingly made more deductions than they should and one even made a deduction for a charitable contribution despite being clearly told that no such contribution was made.
Perhaps Shulman’s claim that the tax code is too complex might not be too far from the truth.
In any case, as a first step towards implementing the new control measures, the IRS is going to send letters to 10,000 tax preparers who are known to be errant in their tax submissions. What will follow will be visits by undercover IRS agents posing as taxpayers ready to blow the whistle on tax preparation cheats.
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