Management Report: IRS Should Test Videoconference Visits with Paid Preparers
| Report Type |
Reports and Testimonies |
| Report Date |
July 14, 2022 |
| Release Date |
July 14, 2022 |
| Report No. |
GAO-22-105978 |
Summary:
What GAO Found
IRS faces challenges in conducting visits with paid preparers due to COVID-19 in-person restrictions and limited staff availability. This limits IRS’s ability to improve compliance and reduce improper payments. Recent declines in the number of knock and talk visits and due diligence visits conducted through IRS’s Refundable Credits Return Preparer Strategy have limited the amount of revenue IRS can protect from improper claims of refundable credits and other tax benefits.
Types of IRS Visits with Preparers and Results
According to IRS officials, in-person visits to paid preparers offer IRS an important opportunity to interact with preparers, identify problems, and help improve compliance with due diligence requirements. These requirements are set by law and help to ensure accurate preparation of tax returns when claiming certain refundable credits and tax benefits. While due diligence visits and knock and talk visits can be the most expensive compliance effort, they help IRS address millions of dollars in potentially improper claims at a relatively low cost. From fiscal years 2017 to 2020, IRS estimated that these visits on average protected about $118 million of tax revenue per year at an average cost of $3.3 million per year.
IRS's Refundable Credits Return Preparer Strategy includes pilot testing of new compliance actions most years. The annual planning process occurs during the summer months. IRS should consider including a videoconference pilot as part of its Refundable Credits Return Preparer Strategy for the upcoming fiscal year. IRS officials said they have not tested a videoconferencing option for preparer visits and raised questions about its potential benefits and challenges.
Videoconference visits could help IRS mitigate in-person restrictions in the near term and provide additional benefits over the long term such as increased flexibility, modernization of IRS compliance activities, and operational cost savings. Without plans to test videoconferencing visits with preparers, IRS will remain limited in its efforts to address preparer noncompliance. It may also miss opportunities to innovate its compliance actions and align with agency-wide efforts to expand digital services to taxpayers and professionals.
Why GAO Did This Study
Refundable credits—such as the Earned Income Tax Credit, Additional Child Tax Credit, and American Opportunity Tax Credit—provide relief to millions of taxpayers, some of whom are low income and may belong to vulnerable populations. However, IRS reported that it issued an estimated $26 billion of these payments improperly in fiscal year 2021. Further, half of taxpayers who claim refundable credits work with paid preparers to file complete, accurate, and compliant returns. However, many preparers lack professional credentials and have high error rates on their returns.
GAO was asked to review IRS’s Refundable Credits Return Preparer Strategy. This report provides an immediate action IRS could take to test videoconference visits with paid preparers for the upcoming fiscal year to supplement its current efforts. GAO will report additional findings in a forthcoming report.
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