The IRS will be visiting about 2,500 tax return preparers during the filing season to potentially inspect client records. What files they will want to look at, what files you are obligated to share, whether an examination could be started after the visit, how client confidentiality will be protected, and the likelihood of penalties - these issues are all unresolved at this point.
In a December 22 letter to the IRS
Small Business Commissioner, Patricia A. Thompson, chair of AICPA’s Tax Committee, reiterated AICPA’s many concerns about the broad scope of the Preparer Letters and Visitation program. (In late November, IRS sent out letters to over 10,000 preparers reminding them of their obligation to prepare accurate tax returns; with plans to visit 2,500 of those preparers.) “Requesting to review client files is inappropriate unless an examination of the preparer is opened,” she stated.
Thompson noted that members have questioned how they can properly protect clients’ confidentiality and absorb the administrative burden of gathering client files for the Service during their busiest season. “If IRS insists on reviewing actual client files,” she commented, “files should be identified and agreed upon before the visit.” And if taxpayers picked for a compliance check are told why they were selected, the chair observed, so should preparers be told why they were picked for a visit.
Thompson also warned that, as it is currently structured now, the program risks undermining public confidence in the agency. “It gives the impression that the IRS may enter a tax preparer’s office and conduct random searches of private client documents...”