AICPA addresses taxpayer burden estimates with IRS for upcoming tax season.

In an Aug. 3 notice in the Federal Register, the Internal Revenue Service indicated its intent to provide taxpayer burden (time and cost) estimates with the 2006 Form 1040 instructions. The AICPA had raised concerns in Nov. 2005 regarding the taxpayer burden estimates contained in the 2005 Form 1040 instructions. Specifically, the Institute expressed concern that the inclusion of tax return preparation cost estimates in the 1040 instructions: (1) did not reflect marketplace reality, (2) was misleading to taxpayers and tax professionals, and (3) was devoid of any contextual explanation. These concerns have been addressed in the 2006 revisions.

For example, the Federal Register notice provides a clearer explanation that the complexity of a taxpayer's return, the differences in a tax preparer's expertise and level of experience and the geographic location of a preparer's office all can have a pronounced impact on what a tax preparer charges a taxpayer for preparing a tax return.

However, as it did last year, the AICPA questions whether there is any practical utility in including tax return preparation cost estimates with the 2006 Form 1040 instructions. The AICPA recommended, therefore, that the Service not include any tax return preparation cost estimates in those instructions. Still, the Institute believes the IRS again intends to include tax return preparation cost estimates in the instructions, as detailed in Table 1 of the notice. Even if one assumes the Service's estimation process is technically accurate, we continue to believe that the proposed 2006 cost estimates lack clarity and context when presented as part of the Form 1040 instruction burden chart. Thus, the cost estimates are likely to prove problematic and misleading to taxpayers and tax professionals, even when taking into account the improved narrative provided for in the Aug. 3 notice.