Does your tax preparer actually know tax law?
2014 mystery shopper tests conducted by the U.S. Government Accountability Office (GAO) have established that tax return errors are a big problem. Only 11% of the returns from these tests had the correct refund amount. “The mistakes ranged from giving taxpayers $52 less to $3,718 more than they were entitled to.” At the moment, only the states of California, Maryland, New York, and Oregon have enacted consumer protections to ensure that paid tax preparers have the knowledge and training to prepare tax returns correctly. These consumer protections have been proposed in several other states as well as at the federal level. Legislation has yet to be introduced.
A 2016 report by the Consumer Federation of America, Public Views on Paid Tax Preparation: Strong Public Support for New Consumer Protections to Prevent Errors and Fraud, revealed that a large majority of Americans believe paid tax preparers should pass a test administered by the government and licensing requirements should be introduced. These are the findings of the report:
1. About half of the public uses paid tax preparers from time to time and nearly a third uses them frequently. 49% of those surveyed used a tax preparation company in the past five years. The GAO estimates that around 56% of 2011 individual tax returns were completed by paid preparers.
2. 80% of the public supports requiring paid tax preparers to pass a test administered by the government to ensure that paid tax preparers have the knowledge and training to correctly complete tax returns.
3. 83% of the public supports paid tax preparer licensing requirements for paid preparers by a state agency that would also accept and resolve complaints, and enforce consumer protections.
4. 89% of respondents support requiring paid preparers to supply an upfront list of fees.
5. 56% believe paid preparers should have special training but don’t need a degree. 31% believe that paid tax preparers should have a college degree in accounting.
CFA Report (2016): http://consumerfed.org/wp-content/uploads/2016/01/160120_report_publicviewsonpaidtaxpreparation_cfa.pdf