Tax Update Blog: Permalink

JK-

If I may be permitted to join the debate.

I agree with some of your points. It is very true that regulation would not stop tax fraud – and your examples in the CPA community are excellent. And the mecking fuss that is the Tax Code is indeed a serious problem. Making it more simpler would indeed reduce fraud. And I do believe that the IRS should concentrate more efforts on searching for the “data footprints” of “dirty preparers”.

However the real reason to regulate tax preparers is not, as Shulman states, to reduce fraud and close the Tax Gap – it is to protect the public. The creation of a “licensed tax practitioner”, or whatever, designation, with perhaps an initial proficiency exam for new preparers, definitely required minimal annual CPE, strict adherence to a standard of ethics (although Circular 230 does pretty much already cover this area), making only such licensed tax practitioners able to prepare 1040s, and mounting a campaign to educate the public to this new designation, would provide some kind of protection for the taxpaying public. As it now stands, any cafone can hang out a shingle as a “tax professional”.

There would be regulation of unenrolled preparers for the same reason there is regulation of the medical profession – to protect the great unwashed masses from “quacks”. Certainly regulation of doctors has not removed fraud or unethical practice from that profession.

I do not believe that regulation would place an excessive burden on the average existing unenrolled tax professional. I have suggested that most current tax pros in the business for at least 5 years would be “grandfathered” in if certain conditions are met, and therefore exempt from any initial proficiency exam. So there would be no cost to study for or take an exam for most. And, at least in my case, I already earn more, or at least as much, CPE credit hours than that which would be required for maintaining one’s “license” – so I would not incur any additional costs for continuing education. Frankly, those preparers who are not already earning this level of CPE credits annually should be. At most I would have to pay an annual nominal license renewal fee.

While I would not be calling for the regulation of the tax preparation industry if others were not, and would not complain if there was no regulation, I certainly do not oppose the idea, and actually support it now that it is “on the table”.

There is another good reason why there should be regulation of the industry and creation of a “licensed tax practitioner” designation. I discuss that reason in Friday’s post at The Wandering Tax Pro.

TWTP

Okay, chiming in, again,

Yes some sort of regulation is required for tax pros. I mean just as everyone else has pointed out, at this point, anyone can say, “I’m a tax pro”. To ease the mind of the “client” regulate those preparing tax returns as a business/for profit.

To start something like this is going to be costly. Even for grandfathering those in who would qualify under such a thing. Lets look at this. To be “grandfathered in” a tax preparer of 11 years as well as one of 38 years is going to have to “prove” to the IRS that they qualify under whatever guidelines are set forth. Who is going to pay for that? The taxpayers. The “Tax Pro” may charge you more to help recoup his/her cost for time spent. And Even if by some miracle no tax pros bleed this cost down to their clients, A new branch is going to be added to the IRS. Who pays the employees at the IRS? I mean where does this money come from? Yep, Joe taxpayers. One way or another it is going to be costly to taxpayers.

I agree whole heartedly with TWTP in that if Unlicensed preparers aren’t already taking enough CPEs they should be. And they should have those certificates readily available so clients can see that the tax pro they have gone to is indeed keeping up. Again however I know preparers who don’t. And when regulation requires this their cost will go up, and this is going to be pasted down to clients.

I see a large mess coming from this. I am all for regulation of preparers. Yet those with the fancy designations are actually some of the biggest problems in the preparing industry.
I once held a CPA license. Funny, how little tax education I was required to have.
Lawyers, hummm. I have a cousin who is a Lawyer, again not a whole lot of tax education required to be a lawyer.
With the Enrolled Agent program (EA), these people are better equipped as preparers, and yet their function is not so much a preparer but to represent taxpayers with IRS issues before the IRS.

Tax is hard. Regulation will reduce the number of preparers and increase a taxpayers cost to have them prepared. All this and without getting better results.

Lets regulate preparers by all means. Lets take this regulation to everyone CPAs, Attorneys, everyone who actually prepares tax returns for the public needs to fall under regulation.

I agree with you on some points - regulating will not keep people from cheating. If they want to defraud others for personal gain, they will do it. To me, the greatest advantage to regulating preparers (if the government will make this a priority) would be formal testing to ensure that preparers actually know what they are doing. There are a few independent tax preparers in my little home town. I've seen some of the tax forms they have filled out and I was very dissapointed that they are allowed to continue doing such sloppy and error-filled work.

Still, a bigger concern to me are large tax prep companies such as Jackson Hewitt and H&R Block. Their employees take 12 sessions in basic tax prep and are immediately stuck out on the front lines with litttle supervision in many cases. The bad thing is that where I live, it costs more to have Jackson Hewitt prepare a tax return than it does to have the only local CPA do it. If he, with his education and licensing expenses, can keep his costs lower than JH, other licensed tax preparers should be able to as well. Tax preparers should be tested and regulated to ensure that they are preparing returns accurately for their own protection as well as that of the public they are serving.

Why get on the tax preparers? Get on the businesses that fill out the 1099-R's and W-2's..that's all the tax preparers have to go by. I received a 1099-R and and I never knew ALL my retirement funds were distributed! That was from the non profit 501 c3 I worked for. A church...! Lutheran Church Missouri Synod. Then I was told by same company's "Plan Book" I was going to receive another tier of money. The truth is that because I was grandfathered into the retirement plan, I believe the company just wanted to pay me off without my knowledge. I wasn't allowed to access my statement in 8 1/2 years TO THIS DAY. Oh, yes, Ernst and Young was listed on the paperwork of my former employer's by-laws and such. When I talked to an IRS agent, he couldn't find anywhere the acronym
C-SVL, that was printed on the ck. stub. I'm afraid to sign it, because according to all I read, there could be riders and other information that I would not know about. You know, signatures sometimes waive rights we didn't know we had until we longer have them.