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Whither preparer licensing?
June 19, 2009
Everybody's talking about licensing tax preparers. My rant the other day against licensing drew two long and thoughtful responses in the comments, and other tax blogs are pitching in.
TaxGrrrl seems to be in my corner:
Therein is the problem: will certification actually improve tax compliance and reduce fraud?Even if it would, how could the IRS possibly regulate the industry? In 2007, there were nearly 138 million individual federal income tax returns filed. Sixty-one percent of those individual federal income tax returns — about 84 million — were completed by paid preparers.
And how would we pay for it? The IRS is already underfunded.
Robert Flach, The Wandering Tax Pro, definitely is not:
It is my firm belief that one of the main reasons why CPA organizations are against the creation of a “licensed tax preparer” designation, via the regulation of unenrolled tax practitioners, is that this will once and for all do away with the misconception that only CPAs are qualified tax preparers.
Trish McIntire is sceptical.
Kay Bell watches from the sidelines, with lots of background and links.
I don't have time to give them the responses they deserve right now, but I think my original rant still stands up - I don't see where any of my points have really been addressed. It takes a great leap of faith to think that licensing will actually solve the problems it is supposed to address, and it takes no leap of faith at all to assume that it will be expensive both for the IRS and for tax prep customers.
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Comments
Joe,
And what an excellent rant it was . . .
I agree with you that regulation won't "solve" the problem of unscrupulous, incompetent tax preparation.
But when does any law regulating or prohibiting conduct ever eliminate that conduct altogether?
Never.
We have laws prohibiting drug trafficking, yet we still have drug traffickers. We have laws prohibiting drunk driving, yet we still have Dante Stallworth.
I am no way suggesting that the regulation of unlicensed preparers will permanently eradicate bad tax preparation.
I am merely suggesting that since CPAs, Tax Lawyers and IRS Enrolled Agents are heavily regulated (and by virtue of their education and continuing training are the least likely to engage in unscrupulous conduct) we ought to level the playing field and monitor the rest of the tax preparers, too.
The regulation doesn't have to be all that involved. It could be as simple as requiring tax preparers to register with the IRS and obtain a preparer number.
In order to renew their registration, each preparer might be required to prove that he or she has obtained a minimal level of continuing education credits necessary to keep up with changing tax laws.
What's the big deal?
Posted by: Peter | June 19, 2009 1:05 PM
Joe, I almost forgot.
I am proposing that these new regulations ONLY apply to non-CPA, non-lawyer and non-IRS Enrolled Agents who are already regulated under a different regulatory regime.
If you are not a CPA, lawyer or IRS enrolled agent, then, and only then, would you be required to register with the IRS.
Posted by: Peter | June 19, 2009 1:15 PM
I also do not believe licensing will solve any problems. We should allow the consumer to choose the service they want. This is a case where you still get what you pay for. If you want cheap, you may have issues with quality. If you want quality, expect that there is a price.
I feel licensing will just create an "underground" system of preparers who prepare the returns but now do not even sign them.
Posted by: Donna Bordeaux | June 22, 2009 3:21 PM
To DB-
I expect the "underground" system of unethical preparers who do not sign the tax returns they prepare already exists.
To JK-
Opponents are constantly saying licensure will be costly for tax pros. I don't see how (see my Comments on a Comment post). Could you tell me what you anticipate licensure will cost the average tax pro?
Thanks!
TWTP
Posted by: Robert D Flach | June 23, 2009 10:13 AM