You are ultimately responsible for the information filed on your tax return. So, it makes sense to be careful when hiring a paid preparer – whether that person is licensed or not.
In a study of tax returns completed by unlicensed paid preparers, 17 out of 28 – roughly 61 percent – were prepared incorrectly, including one that showed the taxpayer owing $4,903 more than he really did. That’s according to a study by the Treasury Inspector General for Tax Administration, an agency that provides independent oversight of IRS activities.
Most of the mistakes resulted in an underpayment of taxes or a too-big refund. But sometimes it was the taxpayer, not the government, who would have paid for the mistake.
Six returns overstated the amount taxpayers owed by a total of $7,798, with the most glaring of these showing the $4,903 overpayment. Another return had a $1,043 overpayment, while the others were under $1,000.
Overall, only 11 of the 28 returns showed the correct amount for tax owed or refund due. In 2007, the IRS processed about 83 million individual income tax returns filed by paid preparers, according to the report.
The study focused on unlicensed and un-enrolled preparers, specifically those who were not certified public accountants, enrolled agents or tax attorneys. The results seem to indicate that taxpayers should check a preparer’s credentials before deciding to use his or her services.
J. Russell George, the Treasury Inspector General for Tax Administration, says un-enrolled and unlicensed preparers are not regulated. “There have been ongoing concerns from Congress and other stakeholders about the lack of required training or demonstration of ability to apply tax law correctly for these unregulated tax return preparers," he says.
– By Ed Coury, Senior Editor and Midwest Bureau Chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950.
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