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June 25, 2020


Government tells IRS to increase audits of tax preparers

The Treasury Inspector General for Tax Administration (TIGTA) recently released a report that led to some negative publicity for the Internal Revenue Service (IRS). The report shows the IRS failed to hold over 30,000 tax return professionals accountable for their own tax bills.

What was this report?

The report focused on how tax return preparers managed their own, personal tax obligations. The TIGTA claims these tax professionals reported themselves as “non-tax compliant” on Preparer Taxpayer Identification Number applications from 2011 through 2018. The TIGTA also found that many of the tax return preparers the IRS claimed were in an “active collection status” were currently listed as “currently not collectible” within the agency’s system. It is possible an error in coding led to a failure to initiate collection efforts.

Although the TIGTA suggestions almost a dozen changes to help the IRS address the issues, the IRS agreed partially with six. Even so, the TIGTA has stated the proposed changes should help the IRS address and bring into compliance the issue of preparer nonfilers.

Is this a big deal?

The TIGTA report estimates tax return preparers are responsible for 60% of all filed tax returns. Since they play such a large role in the tax system, the agency states it is concerning if these professionals cannot manage their own taxes. The agency also states that if the IRS were to review just 6,903 of these filings, they would like recoup $45.6 million in tax payments.

What does this mean for tax return preparers?

The TIGTA’s call to action and public report will likely result in increased efforts by the IRS to collect from tax return preparers. As a result, the likelihood of a federal tax audit may increase.