Paid tax return preparers across the East Valley should be ready to hear from the Internal Revenue Service as part of its upcoming crackdown on unscrupulous preparers.
Doug Shulman, IRS commissioner, kicked off the 2010 tax filing season Monday by announcing plans to implement national registration, testing and continuing education of tax return preparers. More than 80 percent of American households now use a tax preparer or tax software to help them prepare and file their taxes.
This season, more than 2.86 million individual tax returns are expected to be filed in Arizona, up from more than 2.77 million last year. About 1.9 million of those returns are expected to be filed electronically, up from 1.7 million last year.
"Tax return preparers help Americans with one of their biggest financial transactions each year," Shulman said. "Therefore, it's vital that we ensure that all preparers are ethical, provide good service and are qualified. Tax preparers ... play a pivotal role in our overall strategy to strengthen the integrity of the tax system."
The new plan, to be implemented starting next year, will require all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number. In addition, competency tests will be required for all paid tax return preparers except attorneys, certified public accountants and enrolled agents who are active and in good standing with their licensing agencies.
Also, ongoing continuing professional education would be required for these preparers, and the IRS will be able to suspend or otherwise discipline all preparers who engage in unethical or disreputable conduct.
This year, the IRS will be sending letters to more than 10,000 paid tax return preparers nationwide to remind them to be vigilant in areas where errors are frequently found, including Schedule C income and expenses, Schedule A deductions, the earned income tax credit and the first-time homebuyer tax credit.
Some of these letters will be sent to paid preparers in Arizona, said Bill Brunson, IRS spokesman in Phoenix.
The letters will be sent to preparers with large volumes of specific tax returns where the IRS typically sees frequent errors, Shulman said.
"The earned income tax credit is where we know there is quite a bit of fraud, but also inadvertent mistakes," he said. "The other is the first-time homebuyer tax credit, where we've seen quite a bit of fraud. We're very focused on this filing season."
In addition, thousands of preparers who receive letters will also be visited by IRS revenue agents in the coming weeks to discuss their obligations and responsibilities to prepare accurate returns.
"Some of these visits will be announced and some of these visits will not be announced," Shulman said. "In some of these visits, the people who show up will identify themselves as an IRS agent, and in some of these visits the IRS agent will pose as a taxpayer to see what kind of advice taxpayers are getting."
When selecting a tax preparer, taxpayers should be wary of preparers who claim they can obtain larger refunds than others and base their fees on a percentage of the refund. Also, use a reputable tax professional who signs the return and provides a copy.
Regardless of who prepares their return, the taxpayer is legally responsible for what is on their tax return, Shulman said.