Pandemic-paused IRS return preparer visits could resume by video

By Paul Bonner

The U.S. Government Accountability Office (GAO) recommended in a report Thursday, and the IRS agreed, that the Service should test the feasibility of holding videoconference visits with tax return preparers it flags as posing a high risk for submitting erroneous refundable credit claims, to replace in-person visits the Service has suspended since 2020.

The GAO's management report released Thursday grew out of its ongoing audit of what it calls the IRS's Refundable Credits Return Preparer Strategy but which it noted goes by a variety of titles within the IRS. In general, the effort has entailed visits and letters to selected preparers, with the goal of increasing their understanding of, and compliance with, the credits and other benefits and the preparers' own due-diligence requirements regarding them. The IRS selects the preparers "using automated filters and algorithms" and may also audit the preparers' clients, the GAO said.

In 2011 and 2012, the visits and letters program was more prominent in the IRS's own materials and discussion within the tax community; since then, the program has continued, but with little fanfare.

The GAO report indicated that between fiscal 2017 and 2020, the IRS selected between 141 and 227 preparers each year for what the report called "knock-and-talk visits" and between 725 and 968 in-person "due diligence visits," but none in either category during fiscal 2021 or 2022, due to the COVID-19 pandemic. The IRS did increase its due-diligence contacts by letter, however, to more than 350 annually in 2021 and 2022. IRS officials told the GAO they were uncertain when in-person visits might resume.

Although the in-person visits were time-consuming, expensive, and not always feasible for reaching preparers in remote locations, the GAO said they offered a good return on investment, an estimated annual $118 million in revenue saved, against an administrative average cost of $3.3 million per year.

Videoconferencing could allow the visits to resume at least virtually and perhaps to some extent remedy the administrative problems of in-person visits, the GAO said.

"Videoconference visits may also give [the] IRS an alternative method to conduct more education-oriented KTVs [knock-and-talk visits] when in-person visits are either impossible or impractical, while still providing a face-to-face element to help promote preparer education and compliance with due diligence requirements," the GAO stated in the report.

The GAO noted that, in other operational areas, the IRS has successfully increased its use of videoconferencing with taxpayers and practitioners during the pandemic, including in examinations and appeals. Limitations to its use for the preparer contacts, however, could include reviewing documents preparers provide, which IRS officials told the GAO could not be shared via video alone.

Even so, the GAO recommended, the IRS should pilot-test and evaluate videoconferencing for its education and compliance visits with preparers and, if it determines the benefits outweigh the costs, implement use of the technology. The IRS agreed to do so.

— To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.

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