Shulman: 'Big Shift' Possible in Preparer Standards, But No Details Yet

IRS Commissioner Douglas Shulman discussed return preparer standards, enforcement in a globalized economy and a new IRS initiative focused on high-wealth individuals’ tax compliance during a speech to the AICPA’s National Tax Conference in Washington on Monday.


Return Preparer Oversight

In June, Shulman announced during a hearing of the House Ways and Means Oversight Subcommittee that the IRS would review its supervision of tax return preparers. In his speech Monday, Shulman said the goals of the review are to “ensure that taxpayers who use a return preparer receive competent, professional and ethical service.”


The IRS held public forums and meetings on the topic over the summer. Shulman told the conference attendees that he saw several areas of consensus coming out of those meetings. First, he said, “the status quo is not optimal. Unethical and unqualified preparers can inflict tremendous harm on taxpayers and hurt the integrity of the tax system.”


The second area of consensus, according to Shulman, was that “we need to find a way to ensure that return preparers demonstrate their competency.” The third point was that “return preparers must maintain competency through ongoing education programs.”


Shulman acknowledged that the outcome of the review “could represent a big shift for the tax return preparer community.” However, he did not announce what that outcome would be.



Next, Shulman addressed the topic of globalization of tax administration and the IRS’ focus on international tax issues. He said the IRS is focusing on two angles: (1) Ensuring that taxpayers do not use international capital markets and tax code complexities to “push tax planning beyond acceptable bounds”; and (2) ensuring that U.S. taxpayers pay the taxes they owe on overseas assets.


Shulman reviewed the results of the IRS’ recently ended voluntary disclosure program for taxpayers with overseas accounts who had not complied with foreign bank account reporting (FBAR) requirements. Shulman said that more than 7,500 people had come forward, including some with accounts in excess of $100 million. He promised that the IRS would be “scouring” the information from people who came forward under the voluntary disclosure program to “identify financial institutions, advisers and others who promoted or otherwise helped U.S. taxpayers hide assets and income offshore.”


Shulman warned that the IRS will increase its scrutiny of FBAR filings. He announced that the IRS is opening international criminal investigation offices in Beijing, Panama City and Sydney.


High-Wealth Taxpayers

Shulman also announced the formation of a global high-wealth industry group within the IRS’ Large and Mid-Size Business (LMSB) division. This group will centralize and focus the IRS’ compliance efforts involving high-wealth individuals and their businesses. It will allow the IRS to take a unified look at all the business enterprises controlled by a high-wealth individual and better understand that individual’s entire economic picture. While the group will be housed in the LMSB, its mission will necessarily touch upon other IRS operating divisions, Shulman said, because one wealthy individual’s complex financial arrangements may include entities that fall under various IRS divisions.


Shulman said the IRS has already started hiring agents and some specialists for this new group. It will start with a small number of examinations using an enterprise or integrated approach. He anticipates the group will grow in the future.


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