Many Americans rely on paid tax preparers to file their federal taxes, but a new report from the U.S. Government Accountability Office (GAO) found that most tax preparers aren’t required to meet any education, testing, or competency standards, which contributes to costly mistakes for taxpayers and the U.S. government.

“Many paid preparers do not have professional credentials and are generally not subject to IRS regulation, including competency testing, suitability checks, or educational requirements,” the GAO wrote in the report, titled, "Paid Tax Return Preparers: Opportunities Remain to Improve IRS Oversight."

57% of taxpayers burned

According to the report, more than 85 million individuals, which is about 57% of taxpayers, used a paid preparer in fiscal year 2024, but most of those preparers operate without standards that ensure they understand tax law or prepare accurate returns.

“Paid preparer errors contribute to billions of dollars in improper claims of refundable tax credits and can have negative consequences for taxpayers,” the watchdog said, noting that return mistakes can cause people to “lose out on tax benefits” or face penalties.

The report also highlights prior GAO work showing that unregulated preparers make errors at higher rates than taxpayers preparing their own returns. 

“Our prior work indicates that in some circumstances these unregulated preparers can make errors at a higher rate than taxpayers who prepare their own returns,” the GAO wrote.

In addition to errors that reduce refunds or improperly inflate credits, some unregulated preparers don’t even register as required. 

"Unqualified preparers can make serious errors that can cause taxpayers to lose out on benefits or subject them to audits or penalties," read the report. "These errors can also lead to billions of dollars in improper payments and reduce federal revenue. But IRS only has the legal authority to oversee the credentialed preparers."

The GAO pointed out that some individuals “complete tax returns on behalf of clients without providing a valid Preparer Tax Identification Number," which is a practice the IRS refers to as “ghost preparing.”

At the present time, the IRS only has the legal authority to regulate a subset of prepares, such as credentialed certified public accountants, enrolled agents, and attorneys, leaving unenrolled preparers outside the scope of mandatory testing or continuing education.

The GAO urged Congress to take action on this issue.

“We previously recommended that Congress provide IRS the authority to establish professional standards for all paid preparers,” the report read.

The GAO explained that such authority could help reduce mistakes and protect taxpayers. Without that authority, the watchdog agency said, taxpayers remain vulnerable to poor-quality preparation that can result in costly errors and billions in improper tax benfits and incorrect refunds.