The IRS Paid Out $26 Billion in Bad Refundable Credits. It Doesn't License the People Who Filed Them.
Summary
In fiscal 2021 the IRS improperly paid $26.1 billion of the $115 billion in refundable tax credits it issued — about 23 cents of every dollar, per its own compliance estimate. Two-thirds of the nation's 870,000 paid tax preparers hold no IRS-recognized credential, and the agency's own oversight program reaches fewer than 2% of preparers a year.
The credential that isn't one
Every paid preparer must hold a Preparer Tax Identification Number, or PTIN — that part of the system works. As of December 2025, 870,000 people had registered or renewed a PTIN for the year. But a PTIN certifies nothing about competence. It is only a registration number. The preparers who actually carry a professional credential — enrolled agents, CPAs, attorneys, enrolled actuaries and enrolled retirement plan agents, all bound by Treasury's Circular 230 standards of conduct — numbered just 295,751 of those 870,000. The remaining 574,249, about two-thirds, are what the itself calls "unenrolled preparers": no competency testing, no education requirement, no ethics rule they're bound to unless they volunteer for one. In most states, anyone can be one.
The has tried to close this gap before. In 2011 it issued regulations requiring registration, testing, and continuing education for all paid preparers. In 2014 the D.C. Circuit struck the rule down in Loving v. , ruling the agency lacked statutory authority under 31 U.S.C. § 330 to regulate preparers who aren't already licensed professionals. Since then, , the Treasury Inspector General for Tax Administration, and the National Taxpayer Advocate — every year since 2002, per the Taxpayer Advocate's own count — have recommended Congress grant that authority directly. Bills have been introduced in the current, 119th Congress (H.R. 1983, the Tax Return Preparer Accountability Act of 2025, and H.R. 6323, the Taxpayer Protection and Preparer Proficiency Act) that would do it. As of February 2026, neither has passed.
View data as table
| Total PTIN holders, Dec. 2025 | 870,000 | GAO-26-108723, p.3 |
|---|---|---|
| Credentialed tax practitioners | 295,751 | GAO-26-108723, p.2 (Figure 1 note) |
| Unenrolled preparers | 574,249 | derived: 870,000 minus 295,751 |
What the gap costs
Unregulated doesn't mean harmless. 's own review of undercover visits to commercial preparers found that most failed to calculate the correct refund at all; in its 2014 round of 19 test visits, preparer errors swung refunds anywhere from $52 too low to $3,718 too high. Across 's broader National Research Program audit data for tax years 2006 through 2009, returns completed by paid preparers carried a 60 percent estimated error rate, against 50 percent for returns people filed themselves — and has separately found that unenrolled preparers make errors on refundable-credit claims, like the Earned Income Tax Credit, at higher rates than either enrolled preparers or -sponsored volunteer preparers do.
Those errors show up in the government's own books. In fiscal year 2021, the paid out $115 billion in refundable tax credits — the Earned Income Tax Credit, the Additional Child Tax Credit, and the American Opportunity Tax Credit combined — and its own compliance estimate found $26.1 billion of it, about 23 percent, was paid improperly: the wrong amount, or paid without documentation to support it. About half of the taxpayers claiming these credits use a paid preparer.
View data as table
| Total refundable credits paid, FY2021 | $115.0B | EITC, Additional Child Tax Credit, American Opportunity Tax Credit |
|---|---|---|
| Paid correctly | $88.9B | derived: $115.0B minus $26.1B |
| Paid improperly | $26.1B | ≈23%; GAO-23-105217, p.1 |
does have a targeted response — the Refundable Credits Return Preparer Strategy, which flags preparers whose clients' returns show a high probability of errors and escalates from warning letters to audits to site visits. 's assessment of the program's actual footprint is blunt: it reached "less than 2 percent in 2021" of preparers with any education or enforcement action at all. Even preparers the program does flag aren't guaranteed a consequence — lacks authority to bar an unenrolled preparer from the business the way it can suspend a CPA's or attorney's ability to practice before the agency.
The takeaway
- The regulatory gap and the dollar loss are two views of the same problem. Two-thirds of paid preparers face no federal competency standard, and a quarter of refundable-credit dollars go out the door wrong — 's own work links the two directly.
- The asked for broader authority, lost in court, and has been waiting on Congress ever since. A 2011 rule requiring testing and registration for all preparers was struck down in Loving v. (2014); oversight bodies have recommended Congress restore that authority in every year since, most recently via bills still pending in the 119th Congress.
- The enforcement does run barely touches the preparer population. A program built to flag high-risk preparers reached fewer than 2 percent of them in the year measured — not because the errors are rare, but because the reach is small.
The $115 billion/$26.1 billion refundable-credit figures are 's own fiscal-year-2021 compliance estimate, the most recent full breakdown has published for that credit set; more recent government-wide improper payment totals exist but were not available broken out the same way at the time of writing, so this piece uses the FY2021 figures rather than mix methodologies. The 870,000/295,751 preparer-credential figures are December 2025 counts, the most current available.
Sources
- U.S. Government Accountability Office, Paid Tax Return Preparers: Opportunities Remain to Improve Oversight (-26-108723, Feb. 24, 2026) — the 85-million/57-percent paid-preparer usage figure for FY2024, the 870,000 total PTIN holders and 295,751 credentialed tax practitioners as of December 2025, the history of the 2011 regulations and Loving v. , and the status of pending legislation. gao.gov
- U.S. Government Accountability Office, Paid Tax Return Preparers: Efforts to Oversee Refundable Credits Help Protect Taxpayers but Additional Actions and Authority Are Needed (-23-105217, Nov. 30, 2022) — the FY2021 $115 billion/$26.1 billion refundable-credit payment figures and the "less than 2 percent" reach of 's Refundable Credits Return Preparer Strategy program in 2021. gao.gov
- U.S. Government Accountability Office, Paid Tax Return Preparers: In a Limited Study, Preparers Made Significant Errors (-14-467T, Apr. 8, 2014) — the 2014 undercover-visit error range ($52 too low to $3,718 too high across 19 site visits) and the 60 percent vs. 50 percent paid-preparer/self-prepared error-rate comparison from National Research Program data, tax years 2006–2009. gao.gov
- Loving v. , 742 F.3d 1013 (D.C. Cir. 2014) — the appellate ruling that the lacked statutory authority under 31 U.S.C. § 330 to impose competency testing and registration on all paid preparers, cited via -26-108723's summary of the case.
- Library of Congress, Congress.gov, H.R. 1983, Tax Return Preparer Accountability Act of 2025 and H.R. 6323, Taxpayer Protection and Preparer Proficiency Act, 119th Congress — the pending bills that would grant authority to regulate all paid preparers, both introduced but not enacted as of this writing. congress.gov/bill/119th-congress/house-bill/1983, congress.gov/bill/119th-congress/house-bill/6323
Comments
Always open. Logged-in readers can annotate paragraphs in place.
Anyone can charge you to prepare your federal tax return. No federal test, no education requirement, no license. More than half of individual taxpayers — 85 million people, 57 percent, in fiscal year 2024 — pay someone else to do it anyway, trusting a credential system that for most preparers doesn't exist. The Government Accountability Office has been telling Congress this is a problem since at least 2014. Congress has not fixed it.