Last week, the IRS made a directory of certified tax preparation professionals available to the public to help taxpayers locate professionals who work in this area and verify their credibility. Taxpayers may search this directory by last name, location, and credential type.

The directory lists all recognized Preparer Tax Identification Number (PTIN) holders. Professional tax preparers may apply for a PTIN with the Form W-12. To receive this credential, professional preparers must complete at least 16 hours of continuing education. They must attend another two hours of professional ethics courses each year to maintain it.

Many consider a PTIN the minimum requirement a tax filer seeking assistance should expect of a professional in this area. But importantly, a mention in the IRS’s directory does not equate to actuarial sainthood.

Chad Anthony Chertos and Gregory Edward VanDyke had a PTIN until a Michigan court injunction revoked it last year after both pleaded guilty to conspiracy charges to defraud the federal government. The court also sentenced them to a collective 93 months in prison and almost $500,000 in restitution to the U.S. Treasury.

The duo enticed customers to sign blank tax return forms, which the defendants filled out with falsified income information and submitted to qualify customers for low-income tax credit programs. They used false return addresses on these forms to intercept the refund checks. Cheetos and VanDyke accompanied clients to cash the refund checks and exacted their fees, typically between 30% and 50% of the refund.

This is one example of a species of crime the IRS identifies as “abusive return preparation.” See below for the IRS data on this particular infraction and the rate at which the IRS and the Department of Justice identify and prosecute it:

Statistical Data – Abusive Return Preparers

Fiscal Year ‘05 ‘06 ‘07 08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14
Investigations Initiated 248 197  218 214 x 397 371 443 309 305
Prosecution Recommendations 140 153 196 134 x 202 233 276 281 261
Indictments 119 135 131 142 x 182 176 202 233 230
Sentencings 118 109  123 124 x 145 163 172 186 183
85.6% 89% 81.3% 81.5% x 87.1% 88.63% 84.3% 78% 86.3%
Average Months to Serve 18 18  19 18 x 24 25 29 27 28

Source: International Revenue Service. Criminal Investigation Management Information System (CIMIS).

The IRS reported an additional 19 sentences of this type thus far in 2015.

To put these numbers in perspective, taxpayers filed more than 145 million individual income tax returns in 2013. About half paid a professional to help them prepare and submit those returns. The California Tax Education Council in 2013 estimated that “up to 5,000 tax preparers are practicing illegally, possibly hundreds in the Bay Area alone,” according to San Jose Mercury News. California’s tax preparation regulations are stricter than those upheld in most other states.

In recent years, efforts by the IRS to regulate the tax preparation industry have met little success. The Service introduced the PTIN system as a taxpayer security measure in 2011. A D.C. court in the 2014 Loving v. IRS decision ruled that the IRS does not have the right to regulate professional tax preparers at the federal level. This decision rendered attempts by the IRS to control the industry, such as the PTIN system and directory, purely prescriptive.

Since Loving, the responsibility to regulate this industry falls solely to state governments. Regulations of this sort only exist in Oregon, New York, Maryland, and California. This circumstance provides a semi-testable environment by which the efficacy of government regulation in this area can be monitored. Recent research by the Government Accountability Office (GAO) shows that in 2008, paid preparers filed tax returns in Oregon.

were 72 percent higher than the odds for a comparable return filed by a paid preparer in the rest of the country… The higher level of accuracy of Oregon’s tax returns compared to the rest of the country suggests that a robust regulatory regime involving paid preparer registration, qualifying education, testing, and continuing education may help facilitate improved tax compliance.

The American Institute of CPAs (AICPA) has fought this regulation and recently indicated that it will continue to do so even though its will prevailed in the Loving decision. In June of 2014, AICPA addressed a letter to IRS Commissioner John Koskinen, calling the PTIN directory as it now exists “unlawful and improper.” In this letter, the Institute further warns that the directory will “cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.”

PTIN or none, if you think your tax return preparer is involved in illegal activity, report them to the IRS with Form 14157.