Watch those paid tax preparers: They are more likely than not to make errors on your return, a new study found.
The Government Accountability Office studied a small number of tax preparers and found that 17 out of 19 made mistakes. The small sample is illustrative of earlier and larger studies. A 2008 GAO study found all of the samples prepared by “professionals” -- 19 of 19 -- were in error, and a broader GAO calculation of Internal Revenue Service data from 2006 through 2009 showed tax returns by paid preparers had a significantly higher error rate – 60 percent – than audits of returns prepared by ordinary taxpayers – 50 percent.
“GAO found significant preparer errors during undercover site visits to 19 randomly selected preparers,” the GAO report said, noting that the results are specific, not general. “Refund errors in the site visits varied from giving the taxpayer $52 less to $3,716 more than the correct refund amount. Only two of 19 preparers calculated the correct refund amount.”
More than half of all tax preparers (55 percent) are not licensed or certified by the IRS or any state. Only four states – Oregon, California, Maryland and New York – regulate tax preparers. Everywhere else, anyone can hang out a sign and fill out tax forms.
The IRS proposed writing regulations for all tax preparers, but in a Feb. 11 ruling, the U.S. Court of Appeals for the District of Columbia said the IRS was not authorized to write regulations, asserting that power was reserved for Congress and the president.
The GAO found that Oregon, which has the most stringent requirements for tax preparers, had a higher level of accuracy compared to the rest of the country. “We found that the odds that a return filed by an Oregon paid preparer was accurate were 72 percent higher than the odds for a comparable return filed by a paid preparer in the rest of the country,” the report said. That calculation was made in August, 2008, before Maryland and New York implemented its preparer regulations. In California, however, returns were less likely to be accurate, despite rules governing tax preparers.
National Taxpayer Advocate Nina Olson has been pressing for more regulation of tax preparers. In her 2013 report to Congress, Olson called on the IRS to continue to push for more rules for tax preparers, even in light of the adverse court decision, which the IRS has appealed.
“Without any regulation, we will continue to see a proliferation of return preparers showing up at check-cashing places, pawn shops, used car dealers, furniture stores, etc.,” she said.