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Costs of regulation: What Robert is missing
July 28, 2011
Robert D. Flach finds fault with my prediction that the IRS preparer regulation power grab will increase preparer and taxpayer costs:
Joe has said in the past that the new regime will add unnecessary costs for tax preparers, and materially increase tax preparation fees. Horse pucky. $65.25 per year is a pittance, less than $1,00 per 1040 client (in my case at most 20 cents more per client). While there will be a one-time fee to take the competency test (which I still firmly believe should have some kind of grandfathering exemption), it is a one-time fee.
Experience with bureaucracy and the law of supply and demand support me. The real costs to preparers are the time and expense of navigating the IRS preparer bureacracy -- ask the folks who had trouble getting their preparer IDs last year using the IRS system -- and in dealing with the inevitable IRS screw-ups. These costs aren't evenly distributed -- not everyone will have their paperwork eaten by the IRS computers -- but they're no less real.
You can also count on the regulation bureaucracy to cater to its biggest fans -- the big national tax prep franchises and the national accounting firms. They have the compliance departments to deal with the IRS paperwork demands, which will only get worse over time. The Robert D. Flachs of the world will have to use their valuable time to deal with the IRS -- time that comes out of making a living.
Robert doesn't dispute that the system will reduce the number of preparers. When supply goes down and demand doesn't, prices go up. It's the law.
If these rules actually provided benefits that exceed their costs, there would be an argument for them. But even Robert admits that the competency test will be perfunctory. The burden is on supporters of the costs to justify them, and you'd be hard pressed to say that the rules have done any good after one season.
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Comments
JK
Dealing with IRS FUs, and for a NJ preparer much more often dealing with Division of Taxation FUs, is a given for anyone in the tax profession – enrolled or unenrolled. I do not forsee preparer regulation regime FUs taking up any more of my time.
I had an initial problem when I first tried to register online, so I sent in a paper application instead. I expect from now on the annual re-registration will be run more smoothly, and I will have to submit my CPE hours each year, possibly at the same time. What will this take – an hour at most? Even if it takes 2 this is done during “down” time, so what?
For me I see the biggest potential PITA from the electronic filing mandate – although I am currently very easily “off the hook” because of the stupid way the mandate was worded (i.e. “filing” of returns).
I continue to say that I, as a previously unenrolled preparer, will be better off as a RTRP, and I stand by my statements concerning added costs.
BTW – Joe, do you think losing “casual” preparers is a bad thing?
TWTP
Posted by: Robert D Flach | July 28, 2011 10:27 AM
Robert, what is this "down" time of which you speak?
Yes, getting rid of casual preparers is a bad thing. The increased costs won't drive their customers to better preparers. If they stay with preparers, they will get somebody who is more expensive who felt like going through the hoops to pass a meaningless test.
At the margins, some of taxpayers will either self-prepare or drop out of the system altogether, rather than pay more. That hardly improves compliance.
Only time will tell which of us is right, but history says it's unwise to expect any new regulatory scheme to become easier with time. Look at the tax law itself.
Posted by: Joe Kristan | July 28, 2011 11:26 AM
JK-
Down time?
I work at least 12 hours per day, 7 days a week from February 1st through April 15th.
From May through December I work (if you don't count "wandering" the web) on average 2-3 hours a day.
That is why I chose the tax preparation business!
TWTP
Posted by: Robert D Flach | July 28, 2011 11:39 AM