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IRS power grab over prep industry: the first invoice is announced

March 29, 2010

IRS Commissioner Doug Shulman is rolling out pieces of his power grab over the tax prep business:

Under the proposed regulations, the IRS will issue forms, instructions, or other guidance that will require paid tax return preparers to begin using PTINs for all tax returns and refund claims filed after Dec. 31, 2010. Currently, tax return preparers must use either a PTIN or their social security number on tax returns or refund claims that they prepare.

The proposed regulations also provide that tax return preparers must apply for a PTIN, regularly renew the PTIN, and pay associated user fees, which will be described in upcoming guidance. As part of the process, some tax return preparers would also be subject to a tax compliance check, which could include a review of the preparer’s history of compliance with personal and business tax filing and payment obligations.

And when the IRS misplaces the paperwork of a solo tax practice in Missouri or Iowa, we can count on Doug Shulman giving them just as much attention as H&R Block or Jackson Hewitt, right?

Bruce, The Missouri Tax Guy, notes the obvious:

My peers and friends in the “field” say there won’t be that much extra cost, I say there will be enough cost to the preparer that this will undoubtedly raise preparer charges thus raising the cost to taxpayers who use paid preparers, we shall see.

Not only the fees charged by the IRS, but the wasteful busy work of filling out a new round of pointless paperwork, and then the time and cost of dealing with the inevitable mistakes and IRS mishandling of it.

Many well-meaning folks support the Shulman power grab because "something must be done" about bad preparers. This shows a touching faith in the ability of government regulation to solve problems that has no support in recent history (Sarbanes-Oxley, meet Lehman Brothers). Instead the big industry players will capture the regulatory process -- an ex-H&R Block official wrote the draft preparer rules for IRS -- and use it to preserve their own position, stifle smaller competitors who lack corporate staffs to deal with regulations, and raise prices.

I wonder: if a preparer has bad things to say about Doug Shulman on a blog, surely there's no chance that the IRS will misfile that preparer's paperwork and visit with an extra-special "tax compliance check," is there?

Related: Preparer regulation: prepare for a mess

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