Money Magazine's test reveals huge tax preparation discrepancies.

Money Magazine’s Tax Test reveals an average discrepancy of over 300% in the amount that tax preparers state is due.

Since 1987, Money magazine has conducted a total of eight "tax tests" for the purpose of testing the knowledge and ability of tax preparers across the country. The test involved sending a financial profile of a hypothetical family to an average of 50 seasoned tax professionals, who agreed to use the data to complete the family’s tax return and then be judged by Money. The tax issues presented on the tests were fairly standard, and in the course of a filing season, the tax pros were bound to encounter most, if not all of them.

The table below tabulates the tax test results for all 8 years that the test was conducted:

Overall Result: There is an average discrepancy of over 300% in what these tax preparers state is due.

Conclusions from Money Magazine’s Tax Test:

	Tax preparers' fees do not reflect accuracy. There was no correlation between the size of preparers’ fees and how well they scored. (Money, March 1988, March 1989, March 1997)
	Congress can cut taxes all it wants, but if your tax preparer doesn’t know all the rules – and Money’s tax test shows that most don’t – you might actually end up paying more. (Money, March 1998)
	The CPA who designed 1989’s test with a colleague felt that so many did poorly because taxes are just one part of their practice; and tax law has become too complex to keep up with on a part-time basis. (Money, March 1990)
	"The implication for you is obvious. Chances are your return is so riddled with errors – even if it’s one of the 48% that will be handled by a professional – that you’re paying as much as 25% too much income tax." (Money, March1997)

Results of Money Magazine’s 1993 POP QUIZ:

This year, Money magazine did something a little different. Instead of the traditional tax test, they drew up a list of 10 questions about the tax law passed by Congress in 1993, to test tax preparers’ knowledge of its key provisions. Fifty tax preparers, plucked at random from the Yellow Pages of Atlanta, Minneapolis, Philadelphia, San Diego and Seattle, were asked to take the quiz.

The tax preparers did quite well on the easier questions, but stumbled on questions that were supposedly no-brainers. Here are the results:

	None of the 50 preparers aced all 10 questions, and only 34 got at least half right.
	Fewer than half could cite the income levels at which the new rates kick in.
	Only one could explain how the new law changes the taxation of some municipal bonds.
	Only 1 knew that the gain on a tax-exempt bond could be taxed as ordinary income.
	Only 18 could accurately define provisional income.
	Just 6 knew the precise changes that were made to the AMT (Alternative Minimum Tax).
	Only 19 could say why the new law takes away many advantages of using a trust as a tax–saving device.