Internal Revenue Service Commissioner Douglas Shulman said the agency will place greater focus on return preparers it identifies as “high risk” in the upcoming tax filing system.
“Beginning soon, the IRS will send letters to tax-return preparers who have been identified as high risk,” Shulman said today at a conference in Washington sponsored by the American Institute of Certified Public Accountants. “The letters are intended to bring to these return preparers’ attention that we’ve noticed some questionable traits” on some of their returns.
Beyond the letters, Shulman said the IRS will beef up its compliance efforts by making more personal visits to preparers with “egregious” error rates and scrutinizing earned-income tax credit claims.
The moves are part of a push inside the agency to bring greater consistency to the tax preparation industry, which is dominated by companies such as Jackson Hewitt Tax Service Inc. and H&R Block Inc. The agency launched a program earlier this year requiring tax preparers to register with the government.
Shulman’s comments reflect the agency’s struggles to ensure taxpayers aren’t taking advantage of benefits offered through the tax code, such as the earned income tax credit. A Treasury Department watchdog told a House Ways and Means subcommittee in May that improper payments from the earned-income tax credit total between $11 billion and $13 billion annually.
“We will conduct in-person visits with EITC return preparers to discuss due diligence requirements, assessing penalties against those who are found to be noncompliant,” he said.
Shulman also criticized congressional efforts to cut the budget for the IRS and other federal agencies. Under a House proposal, the IRS would receive $11.5 billion for fiscal 2012, down from $12.1 billion it received this year.
Such budget cuts would make it more difficult for taxpayers to connect with IRS employees to ask questions or work out payment plans, he said. And reducing the agency’s funding would hurt its ability to collect much-needed revenue for the U.S., he said.
“My view is that we’re pretty unique since we actually raise the funds needed to run the government,” Shulman said. “If you’re having a conversation about the deficit, you shouldn’t cut our budget because it actually adds to the deficit.”
After the speech, Shulman declined to comment on settlements that might be worked out between the U.S. and Swiss banks accused of hiding from the IRS the assets of U.S. clients. Credit Suisse Group AG, Switzerland’s second-biggest bank, said today it was ordered by the Swiss government to hand over client information after an IRS request.