Koskinen said the pilot started in 2012 with the identification "of a group of tax return preparers with a history of submitting incorrect or potentially fraudulent tax returns falsely claiming the EITC." The testimony was submitted as part of the committee's discussion of tax preparer regulation.

The IRS designed a series of steps to stop claims using letters, calls and visits to selected preparers. In that first year, the IRS said it stopped an estimated $198 million in unwarranted refunds. The program was expanded last year to include a wider group of preparers and a broader set of interventions and continued the program in 2014.

Koskinen also noted that the proposed 2015 fiscal year budget proposes to increase the fees imposed on preparers for returns designed to fraudulently drive down the amount of tax owed. Currently, the fee is the greater of $1,000 or 50 percent of the income the preparer derived from preparation of a return that improperly lowers taxes owing to an to an unreasonable position taken on the return.

There is a separate penalty issue is from the preparer's willful or reckless conduct. Current, that is the greater of $5,000 or 50 percent of the preparation income and that would rise to $5,000 or 75 percent the income.