Role of Tax Professionals In Achieving Improved Tax Compliance Mark W. Everson Commissioner of Internal Revenue United States of America

IRS Strategic Plan Goals Improve Taxpayer Service Enhance Enforcement Modernize the IRS Through Its People, Processes and Technology

Enhance Enforcement of the Tax Laws Key Objectives: I.Discourage and deter noncompliance with emphasis on corrosive activity by corporations, high-income individual taxpayers and other contributors to the tax gap II.Ensure that attorneys, accountants and other tax practitioners adhere to professional standards and follow the law

Enhance Enforcement of the Tax Laws (continued) III.Detect and deter domestic and off- shore based tax and financial criminal activity IV.Deter abuse within tax-exempt and governmental entities and misuse of such entities by third parties for tax avoidance or other unintended purposes

Role of Tax Professionals in the US Over 1.2 million tax professionals help US taxpayers understand and comply with their tax obligations Paid return preparers used by over 50% of taxpayers Many are not regulated Many are not regulated

IRS e-Services Support Tax Professionals New e-Services offer tax professionals an efficient way to receive and exchange information with the IRS Obtaining tax transcripts Obtaining tax transcripts Filing Powers of Attorney Filing Powers of Attorney Resolving accounts electronically Resolving accounts electronically

Erosion of Professional Standards Vast majority of professionals follow the law and support tax compliance Notwithstanding a general commitment to ethical behavior, standards eroded in the 1990s Growth of abusive transactions developed and promoted by tax practitioners Growth of abusive transactions developed and promoted by tax practitioners Number of steps taken by the IRS to re- establish high professional standards

Office of Professional Responsibility (OPR) OPR sets and enforces professional standards for Attorneys Attorneys Accountants Accountants Enrolled Agents Enrolled Agents In-house counsel In-house counsel OPR does not currently have jurisdiction over other tax return preparers

OPR Revitalized Recruited new OPR leader – Cono Namorato, a prominent former prosecutor and defense counsel Increased OPR staffing Better utilization of existing disciplinary tools OPR is actively examining misconduct issues involving major law and accounting firms and their role in abusive shelters

Regulatory Actions to Address Abusive Practices Additional standards for written advice 1.Specify form and content of opinions used for penalty protection 2.Include best practices for advisors 3.Allow firms to be held responsible if no internal controls exist to ensure compliance New standards build on recent victories in court on false claims of privilege Next revisions to professional standards will address broader ethical issues

Enforcement Initiatives Promote Compliance with Professional Standards Parallel proceedings coordinate criminal, civil and OPR actions Traditional approach of suspending other actions until criminal review is finished no longer works as abusive practices can be promoted over the Internet Traditional approach of suspending other actions until criminal review is finished no longer works as abusive practices can be promoted over the Internet

Enforcement Initiatives Promote Compliance with Professional Standards Son of BOSS settlement set tough terms on a clearly abusive transaction Participants required to pay full amount of tax, plus a penalty Participants required to pay full amount of tax, plus a penalty 1,165 taxpayers accepted the offer, over $3½ billion paid to date 1,165 taxpayers accepted the offer, over $3½ billion paid to date

Recent Congressional Action Strengthens IRS Regulation of Professionals Tax professionals subject to monetary fines, up to the gross income derived from the misconduct Firm may be fined if it knew or should have known of misconduct Monetary penalties may be imposed in addition to or in lieu of limits on practice privileges

Pending Legislation Concerning Practitioners Expand OPR jurisdiction to include tax return preparers Open OPR proceedings to public Require disclosure of Refund Anticipation Loans terms

US Internal Revenue Service Taxpayer Service and Enforcement Measures