IRS Administration of Penalties Imposed on Tax Return Preparers

In response to a congressional request, GAO reported on the Internal Revenue Service's (IRS) administration of the tax return preparer penalties authorized by the 1976 Tax Reform Act.

For a variety of reasons, IRS administration of conduct-related penalties has been uneven, and administration of the penalty for willful misconduct also has been hampered by inadequate guidelines. The lack of specific guidelines, together with minimal documentation in case files, has limited IRS ability to assess the effectiveness of its efforts to detect and deter preparers who willfully understate their clients' tax liabilities. Through program action cases IRS has sought to assess multiple penalties against preparers who have committed multiple violations, but budget constraints have limited the effectiveness of this program. Better management information is needed, because IRS has not sought to specifically identify the size of the problem preparer group, nor has it collected the data needed to determine the effectiveness of its administration of the penalty provisions. In particular, IRS lacks data on the extent to which penalties have been assessed against the same preparers over the course of several years.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Johnny C. Finch Team: General Accounting Office: General Government Division Phone: (202) 512-7824