According to a recent statement to Congress by the Electronic Tax Administration Advisory Committee, fraudulent tax returns in 2012 were nearly seven times the number from ten years earlier. And those were only the instances of fraud the IRS identified and stopped. A large quantity of undetected fraud is suspected. Consequently, the time has never been better for Enrolled Agent tax experts to promote the integrity of their brand.
While the IRS stopped $19 million from reaching unscrupulous tax practitioners, another $1.5 billion was paid to con artists. Many taxpayers were victims of these tax swindlers. The schemes include identity theft and seizure of refunds. Assignment of refunds to personal accounts of tax preparers is illegal. Taxpayers are learning that professionals with EA certification are especially likely to follow ethical and legal standards because doing so protects their credentials.
According to the Congressional report, fraudulent tax returns identified in 2002 totaled only $3 billion and about $2.5 billion of that was stopped before refunds were issued. Findings by the reporting committee pointed out that the most cost effective future compliance measure is detecting suspicious tax preparers rather than examining more individual taxpayers.
The IRS is expected to expand its scrutiny of tax return preparers as it continues developing the Return Review Program into a modernized fraud and compliance detection system. As a result, becoming an Enrolled Agent could benefit a tax professional by establishing an enhanced reputation at the IRS.
Commensurate with the goal of reduced fraud is alerting taxpayers to exercise caution when selecting tax preparers. An impediment to this process is the restriction some states place on a tax practitioner with an EA license. These jurisdictions prohibit Enrolled Agents from using their certification in advertising or promotion to prospective clients. Among the states are Ohio, North Carolina, and Georgia.
Earlier this summer, bills were introduced in both the US Senate and the US House of Representatives to correct this situation. If enacted, the legislation would permit everyone meeting Enrolled Agent requirements to identify themselves with the special tax credential. By overriding state restrictions on EAs, taxpayers in several locations will have a new way for identifying the proficiency of tax practitioners.
Senator Rob Portman, sponsor of the Senate bill, pointed out that many families and businesses in his home state of Ohio are presently unable to know the degree of competency possessed by tax professionals. Allowing Enrolled Agents to highlight their credentials is intended to serve taxpayers as they carefully select tax assistance.
The proposed legislation was endorsed by the National Association of Enrolled Agents, which represents more than 51,000 EAs throughout the US. Also supporting the new measures is the National Association of Tax Professionals, whose membership includes unlicensed tax preparers plus approximately 7,000 EAs. If more consumers learn about distinctive testing and continuing education for EAs, a rising number of tax practitioners may seek the designation as an avenue for professional growth.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.