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December 2, 2014


Allegedly abusive tax return preparers, part 1: the IRS program

The sheer complexity of the U.S. tax code causes many taxpayers to seek assistance from a paid tax return preparer.

Most preparers do a creditable job. Many do outstanding work. But the IRS has long been concerned about incompetent or untrustworthy preparers. The concern is that such preparers can harm taxpayers and undermine the goal of voluntary tax compliance.

In this two-part post, we will discuss an IRS program intended to address this concern. This program is the Return Preparer Program (RPP).

The program is run out of the IRS Criminal Investigation division. Originally put in place in 1996, its goals are to identify abusive preparers and hold them accountable. This is done with civil enforcement actions and, in some cases, criminal prosecution.

As we noted nearly a year ago, in our December 23 post last year, selecting a tax return preparer is an important choice for taxpayers. This is not only because of a desire for good service. It is also because, ultimately, taxpayers are responsible for what is in their returns.

This means that if something goes wrong and questions of potential tax fraud arise, it isn’t only the tax preparer who can get in trouble with the IRS. It is also the taxpayer.

But what exactly is an “abusive” tax return preparer? On its website, the IRS gives several examples of the types of actions that it considers indicators of false or fraudulent returns. When a return preparer claims false tax deductions, it can be an indicator of tax fraud. The same is true of excessive exemptions or improper credits.

These examples are straightforward enough. But there are also plenty of ambiguous situations that arise, such as when a return preparer may have made an honest mistake. This is all too easy to do given the complexity of tax law.

In part two of this post, we will discuss what a tax return preparer can do when the IRS alleges some form of wrongdoing.

Source: “Abusive Return Preparer – Criminal Investigation (CI)

Tax Crimes