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Wasting money: what's the big deal?
June 25, 2009
Excellent tax blogger Peter Pappas responded to my opposition to preparer licensing in the comments:
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?
...
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.
My thoughts:
Peter says " It could be as simple as requiring tax preparers to register with the IRS and obtain a preparer number." But he immediately makes it not so simple by adding a CPE requirerement. That alone will require a major IRS bureau to monitor the CPE and registration of tens of thousands of preparers. The vast majority of the preparers covered will be honest ones that are trying their best to make a living helping folks through the tax maze. The dirty preparers will throw together fake CPE, or get cheap CPE credits online, and still continue to be dirty preparers. Except now they will be dirty tax professionals who can call themselves "Officially licensed tax professionals."
Whan has any regulatory regime not expanded? The next time a tax scam involves a lawyer or accountant -- and it will happen -- the IRS or some congresscritter will say the licensing regime should "at least apply the the minimum standards that apply to H&R Block" to lawyers and CPAs. Any new regulation scheme will eventually cover everyone.
What's the big deal? It will waste resources. The bad guys will quickly adapt to the licensing and go on being bad guys. The IRS will spend millions of dollars shuffling paper and bugging people who are late filing their CPE or whose paperwork goes astray. These millions would be better used upgrading IRS data analysis techniques to enable it to spot bad preparers by their data footprint. Cheaters leave tracks all over their returns; sophisticated data mining will be much more effective than collecting tons of CPE paperwork.
More tomorrow.
Related: Yes, I still don't want to regulate preparers
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Comments
Joe,
I am with you on government waste and inefficiency.
I do not favor an ineffective and wasteful regulatory regime.
I favor only one that works.
You begin with the assumption that none could ever work.
And if you start with the presumption that everything the government does is wasteful, then you would have to conclude that the use of taxpayer dollars to "upgrade statistical analyses" would be equally wasteful?
If the government is incompetent to monitor un-licensed tax preparers, doesn't it follow that it's incompetent to monitor the returns prepared by them?
Posted by: peter | June 25, 2009 3:37 PM