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entitled 'Tax Preparer Regulation: IRS Needs a Documented Framework to 
Achieve Goal of Improving Taxpayer Compliance' which was released on 
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United States Government Accountability Office: 
GAO: 

Report to the Subcommittee on Financial Services and General 
Government, Committee on Appropriations, U.S. Senate: 

March 2011: 

Tax Preparer Regulation: 

IRS Needs a Documented Framework to Achieve Goal of Improving Taxpayer 
Compliance: 

GAO-11-336: 

GAO Highlights: 

Highlights of GAO-11-336, a report to the Subcommittee on Financial 
Services and General Government, Committee on Appropriations, U.S. 
Senate. 

Why GAO Did This Study: 

Paid preparers prepare about 60 percent of all tax returns filed, and 
their actions significantly affect the Internal Revenue Service’s 
(IRS) ability to administer tax laws. Previously, GAO found that some 
preparers made significant errors in preparing tax returns and 
proposed stricter regulation of preparers. IRS is implementing new 
requirements for paid preparers that it believes will increase tax 
compliance, which will reduce the gross tax gap between taxes owed and 
taxes paid, last estimated at $345 billion for 2001. 

GAO was asked to (1) describe IRS’s plans for implementing and 
ensuring paid preparer compliance with the requirements; (2) assess IRS’
s resource estimates for the requirements; and (3) assess IRS’s plans 
to use the requirements to improve taxpayer compliance and evaluate 
their effect. To meet these objectives, GAO reviewed IRS planning 
documents and interviewed IRS officials and representatives and 
members of paid preparer associations. 

What GAO Found: 

IRS has implemented a registration requirement for paid preparers that 
includes obtaining a preparer tax identification number (PTIN) and 
plans to implement competency testing and continuing education 
requirements, as shown in the figure below. IRS also plans to require 
paid preparers to adhere to standards of practice and the revisions 
are currently being reviewed by the Office of Management and Budget. 
In addition, IRS has conducted an outreach campaign consistent with 
key practices to inform paid preparers of the new requirements. For 
example, IRS developed a standardized message that it distributed in 
different formats. IRS is developing strategies for how to ensure that 
paid preparers comply with the new requirements, according to the 
director of IRS’s Return Preparer Office. 

Figure: Proposed Timeline for IRS’s Implementation of Paid Preparer 
Requirements: 

[Refer to PDF for image: timeline] 

Continuing education requirement-–TBD: 
* 15 annual hours required; 
* User fee: TBD. 

September 28, 2010: 
PTIN registration began: 
* Fee of $64.25 charged; 
* Registrants asked about personal tax compliance and felonies. 

Mid-year, 2011: 
Competency testing available: 
* User fee-–To be determined (TBD). 

December 31, 2013: 
PTIN revoked if competency test not passed. 

January 31, 2014: 
Searchable database of paid preparers available. 

Source: IRS. 

[End of figure] 

IRS is funding the paid preparer requirements through user fees, which 
it is setting consistent with established criteria for cost 
estimating. For example, in setting the PTIN user fee to ensure it 
covered program costs, IRS identified key costs associated with 
registration, estimated fixed costs, and based some variable costs on 
similar registration efforts. 

IRS has discussed but not documented a framework for how it plans to 
use the requirements to improve taxpayer compliance. For example, IRS 
plans to develop a comprehensive database containing information on 
paid preparers and related tax returns. Also, IRS has yet to document 
how it will assess the requirements’ effect, for example, by 
identifying what baseline data IRS needs. Without a documented 
framework, IRS may have difficulty (1) assessing whether it has 
adequately planned for what data it needs to collect and (2) deciding 
how to allocate resources given competing priorities. A framework 
could also help assure paid preparers, who bear the burden of 
complying with the requirements, that IRS will assess whether the 
requirements provide their intended benefit. 

What GAO Recommends: 

GAO recommends that IRS document a framework for using the paid 
preparer requirements to improve taxpayer compliance and evaluate 
their effect on taxpayer compliance. In commenting on a draft of this 
report, IRS agreed with the recommendation. 

To view the full product, including the scope and methodology, click 
on [hyperlink, http://www.gao.gov/products/GAO-11-336]. For more 
information, contact James White at (202) 512-9110 or whitej@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

IRS Has Implemented a Registration Requirement for Paid Preparers and 
Plans to Implement the Additional Requirements Gradually: 

IRS Is Funding the New Paid Preparer Program through User Fees, Which 
IRS Is Setting Consistent with Established Criteria: 

IRS Has Not Documented a Framework for Using the Requirements to 
Improve Taxpayer Compliance and Measuring Their Effect: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Internal Revenue Service: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Applicability of New Requirements by Type of Paid Preparer: 

Table 2: Setting the PTIN Registration User Fee: 

Table 3: Collecting, Using, and Reviewing the PTIN Registration User 
Fee: 

Figures: 

Figure 1: Proposed Timeline for IRS's Implementation of Paid Preparer 
Requirements: 

Abbreviations: 

CPA: Certified Public Accountant: 

EA: Enrolled Agent: 

IRS: Internal Revenue Service: 

OMB: Office of Management and Budget: 

PTIN: preparer tax identification number: 

RPIPO: Return Preparer Implementation Project Office: 

RPO: Return Preparer Office: 

TIGTA: Treasury Inspector General for Tax Administration: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

March 31, 2011: 

The Honorable Richard J. Durbin: 
Chairman: 
The Honorable Jerry Moran: 
Ranking Member: 
Subcommittee on Financial Services and General Government: 
Committee on Appropriations: 
United States Senate: 

Paid tax return preparers prepare approximately 60 percent of all tax 
returns filed. The Internal Revenue Service (IRS) has acknowledged 
that paid preparers' actions have an enormous impact on its ability to 
administer tax laws effectively. In previous work, described in our 
background section, we found that some paid preparers made significant 
errors in preparing tax returns, and we proposed stricter oversight of 
preparers as an option to address this issue. While paid preparers 
could be subject to penalties with respect to the preparation of tax 
returns, until recently IRS had not regulated the conduct and 
competency of all paid preparers. IRS is implementing new 
requirements, such as requiring certain types of paid preparers to 
pass a competency test. IRS has concluded that these requirements will 
increase tax compliance, which will reduce the gross tax gap between 
what is owed in taxes and what is paid voluntarily and on time. IRS's 
most recent estimate for the gross tax gap was $345 billion for 2001. 
[Footnote 1] 

You asked that we assess IRS's administration of the new requirements 
for paid preparers. In response, this report's objectives are to (1) 
describe IRS's plans for implementing and ensuring paid preparer 
compliance with the requirements; (2) assess IRS's resource estimates 
for developing and implementing the requirements; and (3) assess IRS's 
plans to use the requirements to improve taxpayer compliance and 
evaluate the effect of the requirements. 

To describe IRS's plans for implementing and ensuring paid preparer 
compliance with the requirements, we analyzed IRS documents and 
interviewed officials from IRS's Return Preparer Office (RPO) and 
Return Preparer Implementation Project Office (RPIPO) based on IRS's 
plans for the requirements, internal control standards, and our prior 
work on communicating with the public about a new initiative. To 
assess IRS's resource estimates, we reviewed IRS documents on the user 
fee that IRS is charging paid preparers for obtaining a preparer tax 
identification number (PTIN) and interviewed officials from IRS's RPO, 
RPIPO, and Chief Financial Officer's office based on prior GAO work on 
cost estimating and user fees. To assess IRS's plans to use the 
requirements to improve taxpayer compliance and evaluate the effect of 
the requirements, we reviewed IRS documents and interviewed RPO and 
RPIPO officials utilizing IRS's plans for the requirements and prior 
GAO work on evaluating performance. In addition, for all three 
objectives, we interviewed representatives from paid preparer 
associations and a representative from a retail tax return preparation 
chain. For further details on our scope and methodology, see appendix 
I. 

We conducted this performance audit from July 2010 to March 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

A paid preparer is any person who prepares for compensation, or who 
employs one or more persons to prepare for compensation, all or a 
substantial portion of a tax return or claim for refund of tax. 
[Footnote 2] Paid preparers prepared almost 60 percent of all federal 
tax returns filed in 2008 and 2009. IRS does not know how many paid 
preparers there are but estimates there are between 900,000 and 1.2 
million. Prior to the new requirements for paid preparers there were 
no national standards that a paid preparer was required to satisfy 
before being compensated for preparing a federal tax return. 
Currently, attorneys, certified public accountants (CPA), enrolled 
agents[Footnote 3] (EA), enrolled actuaries,[Footnote 4] enrolled 
retirement plan agents,[Footnote 5] and other individuals authorized 
to practice before IRS are subject to standards of practice under 
Department of the Treasury Circular No. 230.[Footnote 6] Most EAs are 
required to pass an examination and complete annual continuing 
education, while attorneys and CPAs are licensed by states but are 
still subject to Circular 230 standards of practice if they practice 
before IRS. Previously, other paid preparers were not regulated, 
required to pass a competency examination, complete continuing 
education, or adhere to the standards of practice in Circular 230. The 
states of Oregon, California, New York, and Maryland all regulate paid 
preparers, but oversight in each state varies. IRS has noted that the 
lack of uniform federal regulation of all paid preparers has resulted 
in greatly varying oversight of paid preparers depending on the paid 
preparer's professional affiliations, or lack thereof, and the 
geographical area in which they practice. 

In previous work, we and the Treasury Inspector General for Tax 
Administration (TIGTA) found that some paid preparers made significant 
errors preparing tax returns and we recommended that IRS conduct 
research to determine the extent to which paid preparers file accurate 
and complete tax returns.[Footnote 7] We also recommended that IRS 
develop a plan to require stricter regulation of paid preparers and 
suggested Congress adopt a nationwide paid preparer regulatory regime 
similar to Oregon's paid preparer regulatory regime[Footnote 8] if it 
judged that Oregon's regulatory regime accounted for at least a modest 
portion of the higher federal tax return accuracy in the state. 
[Footnote 9] 

In June 2009, the Commissioner of Internal Revenue initiated a review 
of paid preparers to help IRS strengthen its partnerships with paid 
preparers and ensure that paid preparers adhere to applicable 
professional standards and follow tax laws. IRS recommended changes to 
the oversight of paid preparers in its December 2009 Return Preparer 
Review report.[Footnote 10] These recommended changes included 
mandatory registration for paid preparers who are required to sign a 
federal tax return; competency testing and continuing education for 
paid preparers who are required to register with IRS and who are not 
attorneys, CPAs, or EAs; and holding all paid preparers to Circular 
230 standards of practice, regardless of whether or not the preparers 
are required to sign a federal tax return. IRS intends these new 
requirements to improve service to taxpayers, increase confidence in 
the tax system, and increase taxpayer compliance.[Footnote 11] 

IRS Has Implemented a Registration Requirement for Paid Preparers and 
Plans to Implement the Additional Requirements Gradually: 

IRS has implemented a requirement that paid preparers obtain a PTIN if 
they prepare all or substantially all of a tax return filed after 
December 31, 2010.[Footnote 12] Figure 1 shows IRS's tentative 
schedule for implementing the other new requirements. In addition to 
the requirements shown in figure 1, IRS will require all paid 
preparers to adhere to Circular 230 standards of practice. Revisions 
to the Circular 230 regulations are currently being reviewed by the 
Office of Management and Budget (OMB), according to an official 
involved in the implementation of the new requirements. When the 
revisions to the Circular 230 regulations have been finalized, paid 
preparers will be required to adhere to its standards of practice. 

Figure 1: Proposed Timeline for IRS's Implementation of Paid Preparer 
Requirements: 

[Refer to PDF for image: timeline] 

Continuing education requirement-–TBD: 
* 15 annual hours required; 
* User fee: TBD. 

September 28, 2010: 
PTIN registration began: 
* Fee of $64.25 charged; 
* Registrants asked about personal tax compliance and felonies. 

Mid-year, 2011: 
Competency testing available: 
* User fee-–To be determined (TBD). 

December 31, 2013: 
PTIN revoked if competency test not passed. 

January 31, 2014: 
Searchable database of paid preparers available. 

Source: IRS. 

[End of figure] 

The dates for implementing the competency testing and continuing 
education requirements are tentative because OMB is currently 
reviewing the proposed revisions to the Circular 230 regulations. 
Because these proposed regulations are not final, IRS has not decided 
how it will implement some details of the competency testing and 
continuing education requirements. Nevertheless, the RPO Director 
discussed with us his thoughts on approaches IRS might take. 

Paid preparers may register for a PTIN online or on paper via Form W- 
12, IRS Paid Preparer Tax Identification Number (PTIN) 
Application.[Footnote 13] Paid preparers who currently have a PTIN 
[Footnote 14] must register in the new PTIN registration system but in 
most cases can retain their old PTIN as long as IRS can verify 
identifying information for the existing PTIN. Online registrants are 
supposed to receive a provisional PTIN immediately while paper 
registrants are supposed to receive a provisional PTIN in 4-6 weeks. 
[Footnote 15] As of March 20, 2011, according to an IRS official 
involved in implementing the new requirements, IRS had issued 692,297 
PTINs, approximately 60 percent of which were issued to paid preparers 
with existing PTINs and approximately 40 percent of which were issued 
to paid preparers without existing PTINs. 

Most, but not all, paid preparers were able to obtain a PTIN online. 
According to an official involved in the implementation of the new 
requirements, approximately 92 percent of paid preparers who attempted 
to obtain PTINs by the start of the filing season got them online. The 
rest either attempted to obtain a PTIN by paper or were directed to 
obtain a PTIN by paper, likely as a result of an online authentication 
issue. Officials and members of multiple paid preparer organizations 
stated that some preparers have encountered technical problems when 
using the PTIN registration system but also noted that IRS's 
administration of the PTIN registration system has improved. The RPO 
Director said that IRS has worked to address problems with the 
registration system since it was initiated. For example, married paid 
preparers with different last names from their spouses who filed tax 
returns under the married filing jointly status were experiencing 
difficulty obtaining a new PTIN. The RPO director said that IRS solved 
this problem. For the 2011 tax filing season, IRS will allow paid 
preparers who are able to demonstrate a good faith effort to obtain a 
PTIN, but were unsuccessful, to use their old PTINs or Social Security 
numbers on tax returns. 

When applying for a PTIN, paid preparers are asked to self-disclose if 
they are compliant with their personal and business taxes, under 
penalty of perjury. The RPO Director said that IRS plans to initiate 
automated tax compliance checks on all paid preparers. IRS plans to 
limit the checks to whether the preparers have filed all federal tax 
returns and paid or entered into an agreement to pay federal tax 
debts. Paid preparers are also asked if they have been convicted of a 
felony in the past 10 years, under penalty of perjury. The PTIN 
application includes space to write an explanation for both tax 
compliance and felony information. The RPO Director said that IRS 
plans to check the accuracy of registrants' tax compliance and 
background information by late 2011 and that registrants who provide 
false information on their PTIN applications will have severely 
limited appeal rights if IRS proposes to deny them PTINs. Paid 
preparers who are attorneys, CPAs, or EAs are asked to self-identify 
their professional credentials. The RPO Director said that IRS does 
not have a single-source database through which it can verify these 
professional credentials (it only has information on EAs).[Footnote 
16] IRS plans to sample randomly attorneys and CPAs for verification 
of their self identification, and the RPO Director said that IRS is 
working toward developing a database that contains information about 
attorneys and CPAs that will allow for automated verification. 

IRS plans to hold paid preparers to Circular 230 standards of practice 
and will establish a new category of practitioner--registered tax 
return preparer.[Footnote 17] These paid preparers will be limited in 
their practice before IRS to preparing tax returns, claims for refund, 
and other documents for submission to IRS but will be required to 
adhere to professional ethical standards when doing so or face a 
penalty. Additionally, paid preparers who are supervised by an 
attorney, CPA, EA, enrolled actuary, or enrolled retirement plan agent 
at a law firm, CPA firm, or other recognized firm and do not sign tax 
returns but obtain a PTIN, while not being granted rights to practice 
before IRS, will be required to meet the same standards. The RPO 
Director said that if paid preparers are denied a PTIN or have their 
PTIN revoked, paid preparers will have the right to appeal this denial 
or revocation in the same manner as other Circular 230 sanctions. 

Applicability of the new paid preparer requirements will vary by type 
of paid preparer, as shown in table 1: 

Table 1: Applicability of New Requirements by Type of Paid Preparer: 

Preparer type: Registered ta[Check] return preparers; 
PTIN registration: [Check]; 
Competency testing: [Check]; 
Continuing education: [Check]; 
Circular 230 standards: [Check][A]. 

Preparer type: Attorneys/CPAs/EAs; 
PTIN registration: [Check]; 
Competency testing: [Empty]; 
Continuing education: [Empty]; 
Circular 230 standards: [Check][B]. 

Preparer type: Enrolled actuaries, enrolled retirement plan agents, 
and preparers of forms not covered by competency test; 
PTIN registration: [Check]; 
Competency testing: [Empty]; 
Continuing education: [Empty]; 
Circular 230 standards: [Check][C]. 

Preparer type: Supervised ta[Check] return preparers; 
PTIN registration: [Check]; 
Competency testing: [Empty]; 
Continuing education: [Empty]; 
Circular 230 standards: [Check][D]. 

Source: GAO analysis of IRS documents. 

[A] Registered tax return preparers are granted limited rights to 
represent taxpayers before IRS and subject to Circular 230 standards 
of practice by the proposed amendments. 

[B] Attorneys', CPAs', and EAs' rights to represent taxpayers under 
Circular 230 are unchanged by the proposed amendments. 

[C] Enrolled actuaries' and enrolled retirement plan agents' rights to 
represent taxpayers before IRS under Circular 230 are unchanged by the 
proposed amendments. Preparers of forms not covered by the competency 
examination are granted limited rights to represent taxpayers before 
IRS and subject to Circular 230 standards of practice. 

[D] Supervised tax return preparers who obtain PTINs are exempt from 
the competency testing and continuing education requirements but are 
not permitted to sign tax returns as paid preparers and are not 
granted rights to represent taxpayers before IRS. They will be subject 
to certain duties and restrictions relating to the preparation of 
returns under Circular 230. 

[End of table] 

According to the RPO Director, some types of paid preparers will be 
exempt from the new competency testing and continuing education 
requirements because they are subject to competency testing and 
continuing education requirements set by their professional licensing 
bodies.[Footnote 18] 

IRS proposed regulations amending Circular 230 will require 
individuals (see table 1 above) to pass a competency test to become an 
officially registered tax return preparer.[Footnote 19] Paid preparers 
who have a valid PTIN before competency testing is available will have 
until 2013 to pass a competency test. Paid preparers who register for 
a PTIN after testing is available must pass a competency test before 
obtaining a PTIN. The RPO Director said that IRS is allowing this 
delay in testing for preparers who register for a PTIN before testing 
is available to encourage paid preparers to register for a PTIN as 
soon as possible while giving them time to prepare for the competency 
test. The RPO Director also said that IRS plans to develop and 
implement one competency test for individuals who prepare returns from 
the individual tax return (Form 1040) series and will assess whether 
IRS needs to add additional tests in the future. The RPO Director also 
said that IRS plans to have the test available at national and 
international locations, which will allow individuals to consult forms 
and instructions during the test, and that individuals will pay a fee 
each time they take the test. After completing the competency test, 
registered tax return preparers will be subject to suitability checks, 
which IRS plans to conduct to determine whether the individual has 
engaged in disreputable conduct.[Footnote 20] According to the RPO 
Director, IRS plans to link suitability checks for registered tax 
return preparers to the competency test so that when paid preparers 
take the competency test they will be fingerprinted, thereby 
submitting to a suitability check. 

IRS plans to implement a continuing education requirement, whereby 
registered tax return preparers (see table 1 above) will be required 
to take 15 hours of training annually--3 hours of federal tax law 
updates, 2 hours of ethics, and 10 hours of additional federal tax 
topics. The RPO Director said that IRS plans to approve continuing 
education providers and audit a random sample of continuing education 
courses. 

IRS Is Conducting an Outreach Campaign Consistent with Key Practices 
to Inform Paid Preparers of the New Requirements: 

In support of the new requirements for paid preparers, IRS established 
a communications team and vested in it responsibility for educating 
paid preparers and taxpayers about the new requirements. In prior 
reports, we have discussed the importance of focusing on external 
communications as a key internal control standard and identified key 
practices for communicating with the public about a new initiative. 
[Footnote 21] In line with key practices for communicating with the 
public about a new initiative, IRS's communications team, for example, 
prepared an action plan, identified stakeholders to engage, and 
developed a standardized message that it distributed in different 
formats--by presentations at IRS Nationwide Tax Forums, executive 
talks to industry groups, and written correspondence with tax 
professionals. Consistent with established criteria for improving the 
usefulness of communication, the RPO Director said that IRS plans to 
develop secure online mailboxes for paid preparers that will be used 
for IRS-paid preparer communication. 

The official leading IRS's communications team said that IRS has not 
yet developed a plan for how it will monitor and evaluate the success 
of its outreach efforts, a key practice for communicating with the 
public. Since the requirements are just beginning to be implemented, 
the effectiveness of the outreach campaign will not be known until 
after the requirements are implemented. Officials and members of paid 
preparer associations we interviewed said that IRS has conducted an 
effective outreach campaign. However, officials and members of one 
paid preparer association we interviewed worry that some paid 
preparers remain unclear about the applicability of the new 
requirements to certain types of paid preparers, and officials and 
members of two paid preparer organizations we interviewed said that 
some paid preparers have likely not heard of the new requirements. 

IRS Is Developing Strategies for How to Ensure Paid Preparer 
Compliance with the New Requirements: 

In its strategic plan for 2009-2013, IRS established strategies 
designed to help it meet its objective of ensuring that paid preparers 
adhere to Circular 230 standards of practice and follow the law, 
including penalizing paid preparers who do not follow tax laws and 
leveraging research to identify fraudulent and noncompliant paid 
preparers.[Footnote 22] According to the RPO Director, IRS plans to 
implement initiatives intended to ensure paid preparers' compliance 
with the new requirements but has yet to make many decisions because 
it is waiting for information from the PTIN registration system that 
will allow it to implement effective initiatives. 

During the first year after the PTIN requirement has been implemented, 
IRS plans to focus on bringing paid preparers into compliance and 
improving its communications and outreach, and not on penalizing paid 
preparers for noncompliance, according to the RPO Director. For 
example, the RPO Director said that IRS plans to contact paid 
preparers who file returns signed with an old PTIN, a SSN, or other 
identification number after the filing season is over. The RPO 
Director said that IRS will direct them to obtain a PTIN that will 
retroactively cover their practice during the recently completed 
filing season. The RPO Director also said that in cases of egregious 
noncompliance, such as paid preparers ignoring an IRS contact 
directing them to use a PTIN, IRS plans to contact paid preparers 
directly. IRS has the authority to penalize paid preparers who are 
required to but fail to include a PTIN on a tax return.[Footnote 23] 

IRS has undertaken one initiative for ensuring paid preparer 
compliance with the new requirements and is evaluating other future 
compliance initiatives. IRS sent letters in November 2010 to 10,000 
paid preparers to remind them of their responsibility to comply with 
requirements for paid preparers, including registering for a PTIN. 
According to officials involved in the implementation of the new 
requirements, IRS is visiting some of the paid preparers who received 
letters to confirm their compliance based on an analysis of IRS visits 
to paid preparers in 2010. An official involved with the 
implementation of the new requirements also said that IRS plans to 
evaluate the results of the visits. The RPO Director also said that 
IRS plans to identify individuals who prepare tax returns for others 
but do not sign the tax return as paid preparers, and is currently 
evaluating methods by which it might do so. Additionally, the RPO 
Director said that IRS seeks to develop a risk-based scoring model to 
maximize the efficacy of its compliance efforts. 

IRS plans to launch a publicly accessible database of all registered 
paid preparers by January 31, 2014, so that taxpayers can check 
whether a paid preparer has registered. The RPO Director said that the 
database will likely include preparers' contact information, whether 
or not preparers have passed the competency test, professional 
credentials, and tax preparation legal problems, if applicable. The 
RPO Director also said that IRS will not launch the database until it 
is sure it has the capability to rapidly respond to any associated 
problems with the data because paid preparers mistakenly identified as 
noncompliant could be negatively affected financially. 

IRS Is Funding the New Paid Preparer Program through User Fees, Which 
IRS Is Setting Consistent with Established Criteria: 

IRS is funding the administration of the paid preparer requirements 
through user fees for PTIN registration, competency testing, and 
continuing education.[Footnote 24] IRS has only determined the user 
fee for PTIN registration so far, which is $50 per PTIN.[Footnote 25] 
IRS contracted with a vendor to establish and maintain the PTIN 
registration system, and the vendor will charge a $14.25 fee, bringing 
the total fee for PTIN registration to $64.25. In determining the 
level of the PTIN registration user fee, IRS has taken actions or made 
plans consistent with established criteria for setting user fees and 
using the resulting revenue. These criteria, which we identified in 
prior reports, include a set of key questions that should be 
considered when designing and implementing user fees and best 
practices for developing cost estimates.[Footnote 26] Key questions to 
consider when designing and implementing a user fee are contained 
within four primary components: setting, collecting, using, and 
reviewing. Table 2 below shows key questions to consider when setting 
a user fee, key criteria for establishing a credible estimate of a 
program's costs, and IRS's actions in setting the PTIN registration 
user fee. 

Table 2: Setting the PTIN Registration User Fee: 

Key questions and criteria: How do users benefit from the program?; 
IRS action: IRS determined that paid preparers benefit by being able 
to prepare returns, and thus IRS can charge a user fee for PTIN 
registration. 

Key questions and criteria: How will the fee be linked to costs? 
Develop estimating plan and define program characteristics; 
IRS action: IRS documented key pieces of the PTIN registration program 
that will need to be funded, such as customer support and marketing, 
IT, compliance, operations support, and foreign paid preparer 
registration. 

Key questions and criteria: How will the fee be linked to costs? 
Determine estimating structure; 
IRS action: IRS estimated PTIN registration program administration 
costs, including start-up, personnel, IT investment, and other related 
program costs. 

Key questions and criteria: How will the fee be linked to costs? 
Identify ground rules & assumptions; 
IRS action: IRS estimated that there are between 900,000 and 1.2 
million paid preparers, and that program costs are uncertain and could 
be higher or lower than estimated. 

Key questions and criteria: How will the fee be linked to costs? 
Obtain data and develop and document an estimate; 
IRS action: IRS developed detailed spreadsheets of PTIN estimates 
based on cost data and documented a user fee to cover its total PTIN 
costs. 

Key questions and criteria: How will the fee be linked to costs? 
Present estimate to management; 
IRS action: Treasury and OMB reviewed IRS's PTIN user fee cost-
estimate. 

Source: GAO and GAO analysis of IRS documents and interviews with IRS 
officials. 

Note: Key questions and criteria are from Federal User Fees: A Design 
Guide, GAO-08-386SP and GAO Cost Estimating and Assessment Guide, GAO-
09-3SP. 

[End of table] 

IRS identified key costs associated with PTIN registration and grouped 
them into five categories: (1) foreign paid preparer registration 
processing, (2) paid preparer program compliance, (3) communications 
and customer support, (4) IT, and (5) operations support. 

Approximately 75 percent of the costs IRS plans to cover with the PTIN 
registration user fee are variable and are contained within the two 
categories of foreign paid preparer registration processing and paid 
preparer program compliance, which includes tax compliance and 
criminal background screenings for paid preparers. To calculate the 
cost of foreign paid preparer registration processing, IRS estimated 
the number of PTIN registrants who will be foreign paid preparers and 
the cost to process each registration. To calculate the cost of 
screening paid preparers for tax compliance and a criminal background, 
IRS extrapolated to the paid preparer requirements the costs of 
screening individuals applying to become IRS e-File providers[Footnote 
27] for tax compliance and a criminal background. The RPO Director 
acknowledged that these estimates are uncertain and therefore the 
actual costs could be higher or lower. 

Approximately 25 percent of the costs IRS is planning to cover with 
the PTIN registration user fee are fixed and are contained within the 
remaining three categories: communications and customer support, IT, 
and operations support. For these three categories, IRS estimated 
various component costs, including staff salary and benefits. IRS 
developed these cost figures assuming that as many as 1.2 million 
individuals will register for a PTIN, an estimate based on the number 
of individuals who signed tax returns as paid preparers in 2006 with a 
PTIN, SSN, or other identification number. IRS has acknowledged that 
this estimate is uncertain. Because these costs are fixed, their 
average will depend on the number of paid preparers who register for a 
PTIN. 

In addition to setting the user fee, there are key questions that 
should be addressed when implementing a new user fee that cover 
collecting, using, and reviewing the fee. Table 3 shows IRS's actions 
to date, as well as planned actions, to address these key questions. 

Table 3: Collecting, Using, and Reviewing the PTIN Registration User 
Fee: 

Key questions: Collecting a user fee; When should the user fee be 
collected, and can the collection system be structured to decrease 
administrative costs? 
IRS action: Paid preparers pay the user fee when they register for 
their PTIN online or by paper. IRS contracted with a vendor to manage 
the PTIN registration system. 

Key questions: Using a user fee; How can the fee be used? 
IRS action: IRS has authority to use funds from the PTIN user fee to 
cover program costs.[A]. 

Key questions: Reviewing a user fee; How often is the fee reviewed, 
and what information is included in the review? 
IRS action: As required by OMB, IRS plans to review the user fee every 
two years. 

Source: GAO and GAO analysis of IRS documents and interviews with IRS 
officials. 

Note: Key questions and criteria are from Federal User Fees: A Design 
Guide, GAO-08-386SP. 

[A] IRS has legislative authority to retain and spend user fees 
collected, provided the fees are based on the cost to IRS of providing 
a service. Treasury, Postal Service, and General Government 
Appropriations Act, 1995, Pub. L. No. 103-329 (Sept. 30, 1994), as 
amended by Pub. L. No. 109-115 § 209 (Nov. 30, 2005). 

[End of table] 

An official who helped to estimate the PTIN registration user fee 
acknowledged that the PTIN registration cost estimates are uncertain 
and subject to change. The official stated that IRS plans to conduct a 
first review of the PTIN registration user fee in the summer of 2011. 
Additionally, the RPO Director said that IRS will be able to change 
the user fee following the review if actual costs are higher or lower 
than predicted. 

IRS Has Not Documented a Framework for Using the Requirements to 
Improve Taxpayer Compliance and Measuring Their Effect: 

IRS has discussed but not documented a framework for how it plans to 
develop service and enforcement efforts that leverage the new paid 
preparer requirements to improve taxpayer compliance. Likewise it has 
not developed a framework for evaluating the effect of any planned 
service and enforcement efforts or the effect of the requirements 
themselves on improving taxpayer compliance. One of IRS's goals for 
the paid preparer requirements is to better leverage the tax preparer 
community to improve taxpayer compliance. The RPO Director shared with 
us ideas on how to achieve that goal. For example, according to the 
RPO Director, IRS plans to develop a comprehensive database containing 
information on paid preparers and the tax returns they prepare. IRS 
plans to use information from this database to test which strategies 
are most effective for improving the quality of tax returns prepared 
by different types of paid preparers.[Footnote 28] Likewise, IRS has 
discussed how to measure the effect of the requirements, for example, 
the effects that requiring continuing education and testing have on 
tax return accuracy. In planning, the RPO has included other IRS 
divisions, such as the Small Business/Self-Employed division, which is 
responsible for examining tax returns, and the Research, Analysis, and 
Statistics unit, which will help monitor and evaluate whether the new 
requirements improve taxpayer compliance. Although IRS discussed with 
us its planned approaches for using the requirements to improve 
taxpayer compliance, it has not yet produced a document that lays out 
this approach. Likewise, as discussed previously, IRS has yet to 
decide how it will enforce paid preparers' compliance with the 
requirements. 

Documenting a framework for using the requirements and measuring their 
effect is consistent with three steps we found leading public sector 
organizations take to increase the accountability of their 
initiatives: (1) define clear missions and desired outcomes; (2) 
measure performance to gauge progress; and (3) use performance 
information as a basis for decision-making.[Footnote 29] IRS has 
defined an overarching desired outcome of increasing taxpayer 
compliance and could increase its accountability by including the next 
two steps in a documented framework. Likewise, we have reported that 
it is important to develop assessment plans prior to full project 
implementation in order to ensure that the data necessary for 
evaluation are collected.[Footnote 30] We also previously reported 
that we were unable to assess whether California's and Oregon's paid 
preparer requirements led to improved return accuracy because data 
were not available on return accuracy prior to the enactment of the 
requirements.[Footnote 31] Both IRS and we have acknowledged the 
importance of measuring performance, including using baseline data and 
having intermediate and end outcomes.[Footnote 32] Since the PTIN 
registration requirement has been implemented and IRS plans to 
implement the other requirements gradually, it is important for IRS to 
identify and collect baseline data to have a basis by which to measure 
the effect of the requirements, IRS's strategies to leverage the 
requirements to increase taxpayer compliance, and the strategies' 
relative costs. In addition, we have also reported that establishing a 
timeline that includes critical phases and essential activities that 
need to be completed by particular dates to achieve results is 
important for accountability. The timeline can help pinpoint 
performance shortfalls and gaps, suggest midcourse corrections, and 
demonstrate progress toward goals.[Footnote 33] 

The RPO Director stated that IRS decided to begin implementing the 
requirements before determining how to use them to improve taxpayer 
compliance and measure their impact because it would take less time 
than waiting to implement all of the requirements until it documented 
its plans. As noted above, IRS's approach to implementing the 
requirements is sequential, so the details of its compliance strategy 
will not be known for some time. However, not documenting the basic 
framework being followed may create problems. 

The lack of a documented framework may have negative repercussions for 
several reasons. First, without a documented framework, the various 
IRS divisions and offices involved in implementing the new 
requirements may have difficulty assessing whether there is a sound 
analysis plan and whether adequate plans are in place to collect the 
data needed to carry out the analysis. Without such assessments IRS is 
at risk of incurring additional evaluation costs by, for example, 
conducting unplanned data analyses, collecting irrelevant data, or 
failing to collect needed data in a timely manner.[Footnote 34] 
Second, the RPO Director stated that IRS does not know when the 
comprehensive database on paid preparers will be completed because 
there are many competing priorities for IRS resources. A documented 
framework with proposed steps and a timeline could help IRS make more 
informed resource allocation decisions. Third, members and officials 
from paid preparer associations whom we interviewed stressed that it 
is essential for IRS to evaluate whether the requirements are 
improving taxpayer compliance, and some stated that the requirements 
will be worthwhile only if they result in an improvement. The impact 
of these requirements depends on the compliance of paid preparers and 
paid preparers bear the burden of complying with the requirements. 
Demonstrating to paid preparers that IRS will evaluate whether the 
requirements provide the benefit of improved taxpayer compliance could 
improve preparers' voluntary compliance with the requirements. 

The framework will likely evolve over time and become more detailed. 
Initially, the framework may be a high level road map for achieving 
taxpayer compliance results sooner and perhaps at a lower cost and 
could include information on IRS's strategies and tactics for 
improving taxpayer compliance and what data need to be collected now. 
The framework may change as IRS assesses the effectiveness of the paid 
preparer requirements and future strategies for using the requirements 
to improve taxpayer compliance. 

Conclusions: 

IRS has made much progress in starting to implement the new paid 
preparer requirements, including educating paid preparers about the 
requirements, implementing the PTIN requirement, and developing a PTIN 
user fee. In order to launch this important initiative, IRS began 
implementing the requirements before laying out strategies for how to 
leverage them and measure their impact in an effort to realize 
benefits sooner. Implementation is under way, but IRS has not 
documented a framework for how to achieve the goal of improving 
taxpayer compliance. Without such a documented framework to guide its 
overall effort, IRS may not adequately or effectively identify and 
collect key baseline data now, modify its strategies to improve 
outcomes, allocate its resources most effectively given competing 
priorities, or maximize paid preparers' compliance with the 
requirements. Initially, the framework may not be detailed. Instead it 
may evolve as IRS develops and assesses additional strategies. 

Recommendation for Executive Action: 

We recommend that the Commissioner of Internal Revenue document a 
strategic framework showing how IRS intends to use the paid preparer 
requirements to improve taxpayer compliance and assess their 
effectiveness. 

Agency Comments: 

In a letter commenting on a draft of this report, IRS agreed with the 
recommendation. IRS stated that it has begun working on a strategic 
framework and plans for the final product to detail the overall 
mission, vision, and overall goals to ensure return preparer oversight 
will ultimately achieve improved taxpayer compliance and tax 
administration. IRS also provided technical comments, which we 
incorporated as appropriate. IRS's comments are reprinted in appendix 
II. 

We are sending copies of this report to the Commissioner of Internal 
Revenue and other interested parties. The report is also available at 
no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. If 
you or your staff have any questions about this report, please contact 
me at (202) 512-9110 or whitej@gao.gov. Contact points for our Offices 
of Congressional Relations and Public Affairs may be found on the last 
page of this report. Key contributors to this report are listed in 
appendix III. 

Signed by: 

James White: 
Director, Tax Issues Strategic Issues Team: 

[End of section] 

Appendix I: Scope and Methodology: 

To describe IRS's plans for implementing and ensuring compliance with 
the new paid preparer requirements, we reviewed documents, including 
Treasury's proposed and final regulations containing the new 
requirements. Additionally, we interviewed officials from IRS's Return 
Preparer Implementation Project Office and Return Preparer Office 
(RPO) responsible for implementing the paid preparer requirements. To 
describe IRS's outreach campaign to inform paid preparers of the new 
requirements, we reviewed IRS documents on communication with external 
stakeholders and the public about the new requirements. Additionally, 
we interviewed the official responsible for leading IRS's 
communication with external stakeholders and the public. We analyzed 
this information against key communications internal control standards 
we identified in GAO's Internal Control Management and Evaluation Tool 
and key practices for communicating with the public about a new 
initiative that we identified in GAO's Digital Television Transition: 
Increased Federal Planning and Risk Management Could Further 
Facilitate the DTV Transition.[Footnote 35] 

To assess IRS's resource estimates to develop and implement the new 
requirements, we reviewed IRS documents on the preparer tax 
identification number (PTIN) user fee that IRS is charging paid 
preparers for obtaining a PTIN and interviewed officials from the 
Return Preparer Implementation Project Office, RPO, and IRS's Chief 
Financial Officer's office. We examined this information using key 
questions that agencies should consider when developing and 
implementing user fees that we identified in GAO's Federal User Fees: 
A Design Guide and best practices that agencies should follow when 
developing cost estimates that we identified in GAO Cost Estimating 
and Assessment Guide.[Footnote 36] In table 2, we examined key 
questions to consider when setting a user fee and key criteria for 
establishing a credible estimate of a program's cost, and IRS's 
actions in setting the PTIN registration user fee. In table 3, we 
examined key questions to consider when collecting, using, and 
reviewing a user fee, and IRS's actions and planned actions in 
collecting, using, and reviewing the PTIN registration user fee. We 
determined whether IRS had considered the key questions and criteria 
and did not examine the appropriateness of the specific program costs 
that IRS plans to fund with the PTIN user fee. 

To assess IRS's plans to use the requirements to improve taxpayer 
compliance and evaluate the effect of the paid preparer requirements, 
we reviewed IRS documents and interviewed Return Preparer 
Implementation Project Office and RPO officials. We examined this 
information using IRS's plans in the December 2009 Return Preparer 
Review and its guidance on measuring performance in the Internal 
Revenue Manual Exhibit 1.5.1-5, Process to Create a Performance Model 
for New (or Revised) Programs. We also examined this information using 
our past work on evaluating a program in Agency Performance Plans: 
Examples of Practices That Can Improve Usefulness to Decisionmakers; 
Executive Guide: Effectively Implementing the Government Performance 
and Results Act; Tax Administration: Planning for IRS's Enforcement 
Process Changes Included Many Key Steps but Can Be Improved; Designing 
Evaluations; Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations; and Tax Preparers: 
Oregon's Regulatory Regime May Lead to Improved Federal Tax Return 
Accuracy and Provides a Possible Model for National Regulation. 
[Footnote 37] 

In addition, for all three objectives we interviewed members and 
officials of paid preparer associations that IRS had convened as 
industry stakeholders, which included the major types of paid 
preparers that IRS intended the requirements to cover. These 
associations were the American Bar Association, American Institute of 
Certified Public Accountants, National Association of Enrolled Agents, 
National Society of Accountants, and National Association of Tax 
Professionals. We also interviewed a representative from H&R Block, a 
retail tax return preparation chain that IRS consulted as part of an 
independent preparer panel and representatives of two additional 
return preparer associations, the American Payroll Association and 
American Society of Pension Professionals and Actuaries, that included 
types of paid preparers that IRS, at the time, intended the 
requirements to cover. IRS has since decided that individuals who 
prepare only employee benefit plan returns are not covered by the 
requirements. We summarized the members' and officials' responses to a 
variety of questions about the paid preparer requirements. 

We shared the criteria on which we based our descriptions and 
assessments in our three objectives with IRS during the course of our 
audit work. 

We conducted this performance audit from July 2010 to March 2011 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Internal Revenue Service: 

DEPARTMENT OF THE TREASURY: 
INTERNAL REVENUE SERVICE: 
DEPUTY COMMISSIONER: 
WASHINGTON, D.C. 20224: 

March 25, 2011: 

Mr. James R. White: 
Director, Tax Issues: 
U.S. Government Accountability Office: 
441 G Street, N.W. 
Washington, DC 20548: 

Dear Mr. White: 

I have reviewed your draft report entitled 'Tax Preparer Regulations: 
IRS Needs a Documented Framework for Achieving Goal of Improving 
Taxpayer Compliance" (GA0-11336). I appreciate your recognition of our 
accomplishments to date in registering over 690,000 paid preparers, 
conducting an outreach program informing paid preparers of the new 
requirements and developing user fees using a methodology consistent 
with established criteria for cost estimating. 

Paid tax return preparers prepare approximately BO percent of all tax 
returns filed. In calendar year 2009, the IRS processed approximately 
83,000,000 individual income tax returns prepared by paid tax return 
preparers. The IRS acknowledges the role that tax return preparers 
play in tax administration. As such, the IRS included the following 
objectives in its strategic plan: 1) strengthen partnerships with tax 
practitioners, tax return preparers, and other third parties in order 
to ensure effective tax administration; and, 2) ensure that all tax 
practitioners, tax return preparers, and other third parties In the 
tax system adhere to professional standards and follow the law. In 
June 2009, the Commissioner launched the Return Preparer Review to 
help accomplish these objectives. The IRS recommendations were shared 
in December 2009 in Publication 4832, Return Preparer Review. The new 
preparer requirements that GAO studied in this report were the result. 
We are committed to moving forward with implementation of all of the 
new return preparer requirements, including testing and continuing 
education, as effectively and expeditiously as possible. 

We will take appropriate actions to address or further review issues 
as they are identified. We agree with your recommendation, and look 
forward to continued engagement by the Government Accountability 
Office. Our specific comments regarding your recommendation are 
enclosed. 

If you have any questions, please contact me, or members of your staff 
can contact David R. Williams, Return Preparer Program, at (202)927-
8428.	 

Sincerely,	 

Signed by: 

Steven T. Miller: 
Deputy Commissioner for Services and Enforcement: 

Enclosure: 

[End of letter] 
	
Enclosure: 

Recommendation: 

The Internal Revenue Service should document a strategic framework 
showing how the IRS intends to use the paid preparer requirements to 
improve taxpayer compliance and assess their effectiveness. 

Corrective Action: 

The IRS agrees with this recommendation and in fact began work on the 
strategic framework for return preparer oversight in September of 
2010. The final product will detail the overall mission, vision, and 
overall goals to ensure return preparer oversight will ultimately 
achieve improved taxpayer compliance and tax administration. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

James White, (202) 512-9110: 

Acknowledgments: 

In addition to the contact person named above, Jeff Arkin, Assistant 
Director; Amy Bowser; Maya Chakko; Ellen Grady; Donna Miller; Cindy 
Saunders; and Dan Webb made key contributions to this report. 

[End of section] 

Footnotes: 

[1] IRS estimated that it would eventually collect about $55 billion 
of the gross tax gap through late payments and IRS enforcement 
actions, leaving a net tax gap of around $290 billion. 

[2] 26 U.S.C. § 7701(a)(36). 

[3] An enrolled agent is an individual who has, either through past 
service and technical experience at IRS or by demonstrating special 
competence through a written examination, earned the ability to 
represent taxpayers before IRS. 

[4] An enrolled actuary is an individual who has been enrolled as an 
actuary by the Joint Board for the Enrollment of Actuaries by 
fulfilling certain knowledge and experience requirements and may 
represent taxpayers before IRS with respect to issues involving 
retirement plans. 

[5] An enrolled retirement plan agent is an individual who has, either 
through past service and technical experience at IRS or by 
demonstrating special competence through a written examination, earned 
the ability to represent taxpayers before IRS with respect to issues 
involving retirement plans. 

[6] Circular No. 230 contains regulations governing the practice of 
practitioners before IRS. 31 C.F.R. part 10. 

[7] GAO, Paid Tax Return Preparers: In a Limited Study, Chain 
Preparers Made Serious Errors, [hyperlink, 
http://www.gao.gov/products/GAO-06-563T] (Washington, D.C.: Apr. 4, 
2006) and TIGTA, Most Tax Returns Prepared by a Limited Sample of 
Unenrolled Preparers Contained Significant Errors, TIGTA 2008-40-171 
(Washington, D.C.: Sept. 3, 2008). 

[8] Oregon requires paid preparers to complete qualifying education, 
pass a state-administered examination, and register to be certified as 
a Licensed Tax Preparer. Paid preparers must complete 30 hours of 
continuing education and reregister in each subsequent year. Oregon 
also requires that all preparers work under the supervision of a 
Licensed Tax Consultant, CPA, public accountant, or attorney. 

[9] GAO, Internal Revenue Service: Fiscal Year 2009 Budget Request and 
Interim Performance Results of IRS's 2008 Tax Filing Season, 
[hyperlink, http://www.gao.gov/products/GAO-08-567] (Washington, D.C.: 
Mar. 13, 2008) and Tax Preparers: Oregon's Regulatory Regime May Lead 
to Improved Federal Tax Return Accuracy and Provides a Possible Model 
for National Regulation, [hyperlink, 
http://www.gao.gov/products/GAO-08-781] (Washington, D.C.: Aug. 15, 
2008). 

[10] IRS, Return Preparer Review, IRS Publication 4832 (December 2009). 

[11] In addition to new requirements for paid preparers, IRS is in the 
process of implementing a mandate contained in the Worker, 
Homeownership, and Business Assistance Act of 2009 (Pub. L. No.111-92) 
for some paid preparers to file tax returns electronically. We 
evaluated IRS's implementation of the mandate in GAO, Electronic Tax 
Return Filing: Improvements Can Be Made before Mandate Becomes Fully 
Implemented, [hyperlink, http://www.gao.gov/products/GAO-11-344] 
(Washington, D.C.: Mar. 7, 2011). 

[12] Furnishing Identifying Number of Tax Return Preparer (Final 
Rule), 75 Fed. Reg. 60,309 (Sept. 30, 2010). In IRS Notice 2011-6, IRS 
has provided a list of forms for which a paid preparer will not be 
required to obtain a PTIN in order to prepare. 

[13] Foreign paid preparers and paid preparers who are conscientious 
objectors to Social Security numbers can register for a PTIN by 
submitting a supplemental form with their application. 

[14] IRS created the PTIN several years ago as a number that paid 
preparers could obtain and use as a substitute for their Social 
Security number on tax returns. 

[15] Attorneys' and CPAs' PTINs will not be provisional. Other paid 
preparers' PTINs will be provisional until IRS can verify the 
information on their application or until paid preparers pass a 
competency test. 

[16] Attorneys and CPAs are professionally certified at the state 
level. EAs are professionally certified by IRS. 

[17] Regulations Governing Practice Before the Internal Revenue 
Service (Proposed Rule), 75 Fed. Reg. 51,713 (Aug. 23, 2010) (to be 
codified at 31 C.F.R. part 10). 

[18] Enrolled actuaries and enrolled retirement plan agents will be 
exempt from the paid preparer competency testing requirement if they 
only prepare tax returns within their limited practice areas, and will 
be exempt from the continuing education requirement. 

[19] 75 Fed. Reg. 51,713. 

[20] 75 Fed. Reg. 51,713. Attorneys and CPAs may practice before IRS 
by submitting a declaration that they are in good standing with their 
licensing authority and that the taxpayer has authorized them to 
represent the taxpayer. 5 U.S.C. § 500(b), (c). IRS is authorized to 
require others wanting to practice before IRS to demonstrate good 
character, good reputation, necessary qualifications, and competency 
to advise persons in presenting their cases. 31 U.S.C. § 330(a). 
Section 10.51 of Circular 230 (31 C.F.R. § 10.51) provides a list of 
conduct considered disreputable, including criminal convictions, and 
therefore punishable by sanction or disbarment. 

[21] See GAO, Internal Control Management and Evaluation Tool, 
[hyperlink, http://www.gao.gov/products/GAO-01-1008G] (Washington, 
D.C.: Aug. 2001) and Digital Television Transition: Increased Federal 
Planning and Risk Management Could Further Facilitate the DTV 
Transition, [hyperlink, http://www.gao.gov/products/GAO-08-43] 
(Washington, D.C.: Nov. 19, 2007). 

[22] See IRS, IRS Strategic Plan 2009-2013, IRS Publication 3744. 

[23] 26 U.S.C. § 6695(c). 

[24] IRS is authorized to prescribe regulations establishing user fees 
for government services or things of value. 31 U.S.C. § 9701. User 
fees must be fair and be based on the cost to the government, the 
value of the service to the recipient, public policy or interest 
served, and other relevant facts. OMB Circular No. A-25 establishes 
federal policy regarding user fees and provides guidance for agency 
implementation of these fees. 

[25] 26 C.F.R. § 300.9. 

[26] See GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008) and GAO Cost Estimating and Assessment Guide, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2009). 

[27] IRS e-file providers are businesses or organizations authorized 
by IRS to participate in IRS's program to file taxpayers' returns 
electronically. Select individuals from these businesses or 
organizations must be listed on their applications, and IRS screens 
these individuals' tax compliance histories and criminal backgrounds. 

[28] For more information on the management information system IRS 
will need to have in order to develop an enforcement strategy based on 
paid preparer data, see TIGTA, It Will Take Years to Implement the 
Return Preparer Program and to Realize Its Impact, 2010-40-127 
(Washington D.C.: Sept. 30, 2010). 

[29] GAO, Executive Guide: Effectively Implementing the Government 
Performance and Results Act, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-96-118] (Washington D.C.: June 
1996). 

[30] GAO, Tax Administration: Planning for IRS's Enforcement Process 
Changes Included Many Key Steps but Can Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-04-287] (Washington D.C.: Jan. 20, 
2004). 

[31] GAO, Tax Preparers: Oregon's Regulatory Regime May Lead to 
Improved Federal Tax Return Accuracy and Provides a Possible Model for 
National Regulation, [hyperlink, 
http://www.gao.gov/products/GAO-08-781] (Washington D.C.: Aug. 15, 
2008). 

[32] GAO, Agency Performance Plans: Examples of Practices That Can 
Improve Usefulness to Decisionmakers, [hyperlink, 
http://www.gao.gov/products/GAO/GGD/AIMD] 99-69 (Washington D.C.: Feb. 
26, 1999) and IRS, Internal Revenue Manual 1.5.1-5, Process to Create 
a Performance Model for New (or Revised) Programs. 

[33] GAO, Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations, [hyperlink, 
http://www.gao.gov/products/GAO-03-669] (Washington D.C.: July 2, 
2003). 

[34] GAO, Designing Evaluations, [hyperlink, 
http://www.gao.gov/products/GAO/PEMD-10.1.4] (Washington D.C.: Mar. 
1991). 

[35] GAO, Internal Control Management and Evaluation Tool, GAO-01-
1008G (Washington, D.C.: Aug. 2001) and Digital Television Transition: 
Increased Federal Planning and Risk Management Could Further 
Facilitate the DTV Transition, [hyperlink, 
http://www.gao.gov/products/GAO-08-43] (Washington, D.C.: Nov. 19, 
2007). 

[36] GAO, Federal User Fees: A Design Guide, [hyperlink, 
http://www.gao.gov/products/GAO-08-386SP] (Washington, D.C.: May 29, 
2008) and GAO Cost Estimating and Assessment Guide, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: Mar. 2009). 

[37] GAO, Agency Performance Plans: Examples of Practices That Can 
Improve Usefulness to Decisionmakers, [hyperlink, 
http://www.gao.gov/products/GAO/GGD/AIMD-99-69] (Washington D.C.: Feb. 
26, 1999); Executive Guide: Effectively Implementing the Government 
Performance and Results Act, [hyperlink, 
http://www.gao.gov/products/GAO/GGD-96-118] (Washington, D.C.: Jun. 
1996); Tax Administration: Planning for IRS's Enforcement Process 
Changes Included Many Key Steps but Can Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-04-287] (Washington D.C.: Jan. 20, 
2004); Designing Evaluations, [hyperlink, 
http://www.gao.gov/products/GAO/PEMD-10.1.4] (Washington D.C.: Mar. 
1991); Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations, [hyperlink, 
http://www.gao.gov/products/GAO-03-669] (Washington D.C.: Jul. 2, 
2003); and Tax Preparers: Oregon's Regulatory Regime May Lead to 
Improved Federal Tax Return Accuracy and Provides a Possible Model for 
National Regulation, [hyperlink, 
http://www.gao.gov/products/GAO-08-781] (Washington D.C.: Aug. 15, 
2008). 

[End of section] 

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