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Why regulating tax preparers will increase consumer costs

January 12, 2010

New Jersey preparer/blogger Robert D Flach doubts that preparer regulation will increase consumer costs:

I cannot see that registration and licensure of tax preparers is going to substantially increase the cost of tax preparation. I already earn more than 15 CPE credits in continuing tax education a year – so there is no additional cost to me there. And to be honest, any unenrolled tax preparer who was not already taking at least 15 hours of continuing education per year certainly should have been.

There are several ways that costs are likely to increase.

First, you are likely to reduce the supply of preparers through any licensing regime. That's the idea, after all. Basic economics say lower supply with the same demand means higher costs.

Also, any regulation regime imposes compliance costs - not just potentially additional continuing education, but also the costs of doing the new IRS paperwork -- time is money, and time spent doing paperwork has a cost. Not to mention the time and money preparers will spend trying to keep their doors open when their paperwork disappears in black hole of the new preparer bureaucracy. These inevitably get passed on to the consumer.

My long-form discussion of the new preparer rules is here.

Tags: preparer regulation.Robert D Flach.