The Honorable Mark W. Everson

Commissioner

Internal Revenue Service

1111 Constitution Avenue, N.W.

Washington, D.C. 20224

RE:     Taxpayer Burden Estimates

Dear Commissioner Everson:

In the August 3, 2006, Federal Register notice, the IRS indicated its intent to provide taxpayer burden (time and cost) estimates with the 2006 Form 1040 instructions. As you may recall, in our letter dated November 30, 2005, we raised concerns regarding the taxpayer burden estimates contained in the 2005 Form 1040 instructions. As detailed in our 2005 letter, we expressed particular 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. We commend the IRS for addressing in the 2006 revisions many of the concerns we raised in our November 30, 2005 letter.

In contrast to the burden estimates found in the 2005 instructions, the recent Federal Register notice does provide a much clearer narrative and written explanation about the agency’s objectives for including taxpayer burden (time and cost) estimates in the upcoming 2006 Form 1040 instructions. The August 3 Federal Register notice also provides a clearer explanation that (1) the complexity of a taxpayer’s return, (2) the differences in a tax preparer’s expertise and level of experience, and (3) the geographic location of a preparer’s office all can have a pronounced impact on what a tax preparer charges a taxpayer for preparing his or her tax return.

Unfortunately, while the August 3 Federal Register notice clearly deemphasizes issues associated with the cost of tax return preparation when compared to last year’s, the IRS still intends to include tax return preparation cost estimates in the 2006 Form 1040 instructions, as detailed in Table 1 of the notice. As we did last year, we question whether there is any practical utility in including tax return preparation cost estimates with the 2006 Form 1040 instructions. 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 August 3 Federal Register notice. The AICPA recommends, therefore, that the Service not include any tax return preparation cost estimates in the 2006 Form 1040 instructions.

We would be pleased to discuss our concerns about the preparer cost estimates at any time with the IRS Office of Research, Analysis & Statistics, the office responsible for compiling the taxpayer burden statistics. If you have any questions regarding our position on the 2006 burden estimates, please contact me at (402) 280-2062, or tpurcell@creighton.edu; James E. Brennan, Chair of the AICPA IRS Practice and Procedures Committee, at (212) 773-3209, or james.brennan@ey.com; or Benson Goldstein, AICPA Technical Manager, at (202) 434-9279, or bgoldstein@aicpa.org.

Sincerely,

Thomas J. Purcell, III

Chair, Tax Executive Committee