Public opinion on return preparers

IRS Oversight Board Survey Finds Growing Support for Tax Preparer Regulation


The 2008 Taxpayer Attitude Survey conducted by the IRS Oversight Board and released on February 2 found growing support for requiring tax preparers to meet standards of competency and ethical behavior to enter the tax preparation business.

Seventy-three percent of taxpayers in 2008 supported standards of competency, up from 62 percent in 2007. Seventy-six percent supported standards of ethical behavior, up from 63 percent in 2007.

Over 80 percent responded that regulation by a government entity or an industry association would influence their choice of a paid preparer. IRS National Taxpayer Advocate Nina Olson has long urged Congress to require federal regulation of unlicensed tax preparers.



The Board also found stronger support for the belief that it is totally unacceptable to cheat on income taxes. Eighty-nine percent of taxpayers believe that cheating is unacceptable, up from 84 percent for 2007. Six percent of taxpayers said a little cheating was acceptable, while only three percent said it was acceptable to cheat as much as possible.



Similar attitudes were reflected in a finding that 94 percent of taxpayers completely or mostly agree that it is every American's duty to pay his or her fair share of taxes. Ninety-three percent believe that everyone who cheats should be held accountable. Sixty percent agree that it is everyone's personal responsibility to report tax cheats, but 37 percent disagree with this view. Only 30 percent agreed that taxpayers should just pay what they feel is fair.



Questions focused on the IRS showed strong support for enforcement programs. Over 90 percent said it was very important or somewhat important that the IRS ensure that corporations, high-income individuals, small businesses and low-income taxpayers each report and pay their taxes honestly.



Taxpayers supported greater funding for the IRS. Sixty percent agreed that the IRS should receive more funding for enforcement and to ensure that taxpayers pay what they owe, but 38 percent disagreed. Thirty-two percent said that the IRS devotes too much of its current resources to enforcement and not enough to taxpayer service, while 44 percent felt that the balance was right.



Sixty-one percent believed that the IRS should receive more funding to provide taxpayer assistance over the phone and in person, while 37 percent disagreed. Over 80 percent of taxpayers agreed that people are more likely to file correctly if the IRS increases the information and guidance it provides.



Of the factors that could influence compliance, 90 percent said that personal integrity had a great deal of influence or some influence over compliance. Sixty-three percent indicated that third-party reporting influenced their compliance, while 59 percent said that fear of an audit influenced their compliance.



The survey also looked at taxpayer attitudes toward different types of assistance from the IRS. Ninety-four percent said that a toll-free phone number was very important or somewhat important to them. Other types of assistance also received high support. There were other questions that looked at how long taxpayers would wait for an IRS representative and how satisfied taxpayers were with the contacts they had with the IRS.



The survey is based on interviews of 525 women and 480 men and was conducted in August 2008. The Board first conducted the survey in 1999 and has conducted it every year since 2002.

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There is one point that I have made and will continue to make: tax return preparers will likely be subject to the $5,000 "reckless" penalty if they do not strictly apply IRS statue and regulation technical and factual requirements to support any deduction or expense. The reason for that is that it is easy to argue "gross negligence" and "reckless conduct" if a tax return preparer has not read and applied the statute and regulations. That takes into account, for example, every item in Schedule A and Schedule C of a 1040 tax return.

Remember that you read that warning in this blog.

I have received a number of request for opinions dealing with narrowly drafted regulations. Return preparers need to read the tax regulations carefully, apply them strictly, and read the applciable interpretative tax law.

Take the time necessary to to this and make sure that you are fairly compensated by your clients for the necessary time needed for that extra effort.

We are in a new set of rules for the tax preparation industry. I hope those of you who read this blog understand the fact that the penalties are too high to be careless or "RECKLESS."

The survey listed above is a "green light" for the IRS to examine returns for reckless conduct.