IRS boosts language capability and tracks preparers

Wednesday, October 27, 2010

U.S. Commissioner of Internal Revenue Douglas H. Shulman's recent keynote speech at a major gathering of tax professionals contained good news for the constituencies that Consumer Action serves. Shulman told the group that the IRS "is also dealing with an expanding number of Limited English Proficiency taxpayers who need to be served. To meet this need, IRS has over 1,800 bilingual employees who provide service to them. We also created a Spanish language website and an IRS Multilingual Gateway and offer over 600 tax products translated into Spanish, Chinese, Vietnamese and Russian." (Click here to visit the IRS Multilingual Gateway.)

In the not-so-good news category, Shulman also noted that "the sheer girth and complexity of the tax code continue to grow, in spite of efforts to simplify it. There have been an astonishing 4,400 legislative changes to the Code from 2000 to September of this year."

He said that Congress has expanded IRS’ duties with tasks to administer the tax portion of new social and economic programs, such as the Economic Stimulus, the Recovery Act, the HIRE Act, the Small Business Act and the tax provisions of the Affordable Care Act.

Tax preparer registration

The growing tax code complexity has fueled an explosive growth in tax return preparation. Once a cottage industry, today more than eight out of 10 taxpayers use a tax preparer or tax software. There are an estimated one million individuals preparing tax returns for a fee.

Shulman said that while many people assume that there is formal oversight or licensing for every return preparer, this has not been true. In 2009 the IRS launched new oversight of tax preparers, including a database of registered professionals. He said that the database will help the public determine which return preparers are properly registered with the IRS. Shulman added, "It will also make it easier for everyone to find and track the bad actors out there. They won’t be able to pull up stakes and move around anonymously."

Electronic Benefits

Shulman said that the IRS last year had a 70 percent e-file rate for individuals as compared to 10 percent 15 years ago, translating into a huge savings for taxpayers. In 2009, it cost the IRS just 19 cents to process an e-filed return – a fraction of the $3.29 it takes to process a paper return. With e-file, taxpayers get their refund faster, said Shulman.

Rapid refund changes

In other tax news of interest to low income taxpayers, Refund Anticipation Loans (RALs) will be more limited in 2010. The IRS will no longer provide a "debt indicator" to tax preparers—information that allowed them to determine if a taxpayer has prior outstanding federal debt from unpaid child support, back federal or state tax debt, unpaid student loans, and veteran affairs debt. Without knowing if a taxpayer's refund may be subject to seizure or garnishment, tax preparers won't be so anxious to offer profitable RALs. From Consumer Action's perspective, this is a good thing because high-cost RALs suck much-needed income from poor families. And, with improvements in e-file, most taxpayers can get their refunds in a week or so of filing their returns.