April 01,2003

Baucus Addresses Ways to Make Tax Filing Easier

As Tax Filing Deadline Approaches, Senator Warns Public of Potential Tax Scams

(WASHINGTON, D.C.) Today U.S. Senator Max Baucus joined his Senate FinanceCommittee colleagues in holding a hearing focused on how taxpayers can avoid problemswith the IRS, especially when using outside paid preparers to complete their tax forms.

"Currently, close to 60 percent of taxpayers use paid tax preparers to file theirreturns,” Baucus said. “While the majority of these preparers are qualified individualswho help make the tax system work, there are no laws or regulations guiding who cansell tax preparations services and there is no specific training required. I'm hopeful thattoday's hearing alerts taxpayers of the pitfalls to avoid as they have their tax returnsprepared."

By identifying common sense steps taxpayers can take when they use paidpreparers, Senator Baucus is hopeful that taxpayers will be able to identify the schemes tostay away from.

-- Statement Attached –

Hearing on Raising Taxpayer Awareness ofSchemes and Paid Preparer Issues

Mr. Chairman, thank you for holding today’s hearing. It is critically important inour oversight role of the tax system to do our part to help taxpayers meet their tax filingobligation.

For the 2002 tax year, 132 million individuals and families will file a tax return.Over half of the returns will be prepared by the 1.2 million tax preparers. In the next twoweeks, a lot of taxpayers will be calling a paid preparer to ask for help in filing their taxreturn. Most taxpayers want to pay their fair share. They are trying to do the right thing.

These taxpayers recognize that paying their taxes is one of the most patrioticthings they can do. These tax dollars provide the government with resources to defendour shores. Educate our children. Protect our environment. Improve our highways. Andhelp provide for our seniors and those suffering hard times.

Our voluntary self-assessment tax system is one of the triumphs of ourdemocracy. The very idea that taxpayers come forward and provide an accounting oftheir income and deductions. They step up and pay what they owe in taxes.This system ensures a smaller government – because the government does notprepare the tax return. This system also demonstrates our confidence that mostAmericans are honest and want to comply.

We need to help taxpayers get it right the first time in order to avoid headachesdown the road. The saying, “an ounce of prevention is worth a pound of cure” could notbe more appropriate when it comes to filing your taxes.

Today’s hearing will focus on how taxpayers can avoid problems with the IRS.Our witnesses will identify common sense steps taxpayers can take when they use a paidpreparer and what schemes to stay away from.

Given the complexity of our tax laws, it is easy to understand why so manytaxpayers seek the assistance of a paid preparer. Our society values specialization. Manytaxpayers do not understand the tax laws. Some simply do not have time to do their owntaxes. And others use paid preparers in the hope of obtaining a larger refund.

This hearing should not be interpreted as a criticism of the important role theyplay. The vast majority of paid preparers provide a valuable service. Undoubtedly, paidpreparers help make the tax system work.

But despite the important role tax preparers play in the annual filing season, verylittle information exists on who provides tax preparation services and the quality of theirwork. There are instances where taxpayers are not well served by paid preparers. As theGAO will point out, even a small percentage of users of paid preparers can translate intomillions of affected taxpayers.

For these taxpayers, the filing of their tax return may begin a long costly processto resolve a tax dispute with the IRS. But, for some taxpayers, visiting a questionablepreparer means a loss of money they were rightfully entitled to receive.

Last year, GAO estimated that up to 2 million taxpayers overpaid their 1998 taxesby almost $1 billion because they claimed the standard deduction when it would havebeen more beneficial to itemize. Half of these taxpayer used a paid preparer.

Another area we should examine more closely is that anyone can be a paid taxpreparer. There are no laws or regulations that limit who can sell tax preparationservices. The types and training of paid preparers vary widely. Most taxpayers do notrealize that there is such a lack of monitoring tax practitioners. “Buyer beware” is just asrelevant with tax preparation and planning as it is with buying a new stereo.

I hope today’s hearing will provide useful, common sense information totaxpayers as they meet their tax filing responsibilities. I look forward to hearing from our witnesses.