IRS: 100K tax preparers fail to follow new rules

WASHINGTON — About 100,000 paid tax preparers who worked on 2011 returns did not follow new rules requiring them to register with the Internal Revenue Service, the agency said Tuesday.

The IRS launched an initiative last year to better police a largely unregulated industry used by most taxpayers. All paid tax preparers must get an identification number from the IRS and provide it on returns they prepare. They will eventually have to pass a competency exam and get annual training, to help reduce fraud and errors.

The agency said it is sending letters to 100,000 preparers who signed 2011 returns but did not provide proper identification numbers. The letters explain the new oversight program.

About 712,000 tax preparers have registered with the IRS so far, the agency said. The rules do not apply to certified public accountants, lawyers or enrolled agents because they are regulated through their professions.

"The vast majority of federal tax return preparers complied with the rules," said IRS Commissioner Doug Shulman. "Obviously, some preparers did not get the word, so these letters provide additional information so they can register as soon as possible."

More than 80 percent of taxpayers use a paid tax preparer or tax software to complete their yearly returns. However, paid tax preparers are unregulated in many states, unless they are also lawyers, certified public accountants or enrolled agents who represent taxpayers before the IRS.

Tax preparers who do not provide proper identification numbers can be fined $50 a return, though the IRS is currently focusing on getting noncompliant tax preparers to register. The IRS can seek court orders barring repeat offenders from preparing tax returns.

The IRS said unscrupulous preparers may attempt to elude the new oversight program by not signing returns they prepare. The agency warned taxpayers to never use preparers who refuse to sign returns. Taxpayers should also avoid preparers who promise larger refunds or those who charge fees based on the size of the refund.