For several years, researchers have been sending people into tax preparation offices to test the quality of the work. The results have been scary:
• A tax preparer in North Carolina wasn’t sure what to do with one client's dividend income form. She decided to just ignore it.
• At a major tax prep chain in Florida, “the preparer seemed to want to help me with owing less, but was unsure how to go about it,” a client told researchers. The preparer tried clicking and unclicking various fields on her computer, explaining that “sometimes it made customers owe less.”
• An independent preparer deducted car expenses from a return. The client didn’t own a car.
• A New Mexico tax preparer asked plenty of questions, but then forgot to list her client’s daughter as a dependent—even though the daughter attended the tax session.
• A second New Mexico preparer needed to ask a supervisor how to round a number to the nearest whole dollar.
Such incompetence isn’t hard to find. Last year, the National Consumer Law Center tested 29 tax prep offices and found only two forms completed correctly. Just two of 19 preparers randomly selected by the U.S. Government Accountability Office calculated the correct refund amount in 2014. One GAO tester was told that income didn’t need to be reported to the Internal Revenue Service if it was reinvested in a mutual fund.
The studies aren’t big enough to generalize about tax preparers. No doubt, there are many well-educated practitioners—professionals who really know tax law, or at least basic math.
The problem is that it’s hard to be sure your preparer knows what he or she is doing. Almost anyone can claim to be a tax preparer; no CPA, law degree, or formal education is required. Pretty much the only thing you need to open up shop is a tax identification number, which the IRS gives out for a $50 fee.
Consumer groups are pushing federal and state lawmakers to impose tighter rules on preparers, requiring certification and education. A Consumer Federation of America survey released on Jan. 19 found that 80 percent of 1,011 respondents supported the idea of requiring tax preparers to pass a test.