Written by Chase Sagum | Last Updated June 26th, 2019Follow Chase Sagum on Google+
Over the past 6 years, the use of paid tax preparers has declined nearly 10%. However, during the same time, the improper use of the Earned Income Tax Credit (EITC) has risen. Much of this can be tied to recent requirements by the IRS requiring that paid preparers exercise due diligence. Paid tax preparers must now ask their clients more detailed questions and require more physical evidence when reporting income, withholding, and credits and deductions.
A taxpayer claiming the EITC incorrectly is nothing new. Of the available refundable tax credits, it is the most misused of them all. Tax preparers are beginning to shy away from clients and returns that they think might be less honest and correct. This, coupled with the increasing availability of affordable, and sometimes free, tax software, has led to a drastic decrease is returns completed by a paid preparer. However, it has also led to an increase in errors.
William Cobb, President and CEO of H&R Block, has a solution: Require taxpayers wishing to claim the EITC, among other refundable credits, to use a paid preparer when filing their taxes. The idea has merit. It should effectively eliminate fraud and errors by holding the paid tax preparer accountable for false information. A person is more likely to cheat when no one is looking. By adding a level of transparency to the process, people, by nature, will be less likely to commit fraud.
However, the EITC was designed to assist taxpayers with low to moderate incomes. Requiring paid preparers, who often levy a hefty fee, would hurt those that need the credits the most. While this will likely never happen, it is interesting to see what paid preparers, such as those as H&R Block, are thinking.