The case for not regulating unlicensed tax preparers

It's true that anyone can hang out a shingle calling him or herself a tax preparer - in most states - and get paid for it, with no specific tax training or education whatsoever. It's also true that the IRS has no way of knowing how many individuals or companies are operating as paid tax preparers, and how many of them are qualified. With so much at stake for the taxpayers – who would be left paying the interest and penalties when errors are discovered -shouldn't there be some regulation?

Now that word has come down from Internal Revenue Service Commissioner Doug Shulman that he intends to recommend regulation of unlicensed tax preparers, interested parties are speaking out.

Here are the views of some who oppose regulation:

Daryl Hill, CAE and the executive director of the Oklahoma Society of CPAs told reporters at GTR Newspapers, "The IRS should first examine the common errors and work to correct those before imposing redundant registration regulations. Congress and the IRS should review the current electronic return originator application process which significantly overlaps and may even duplicate any registration process."

The AICPA does agree that something must be done. But they are not convinced that the desired result – reducing errors - can be accomplished by regulatory or congressional agency proposals. AICPA President and CEO Barry Melancon told reporters, "We have been monitoring this issue for several years and the AICPA will work closely with IRS Commissioner Shulman and his staff as they move forward. Clearly, we support the two goals of increasing compliance and maintaining high ethical standards. We have publicly expressed concerns about previous attempts to regulate tax preparers and we hope the IRS will avoid the pitfalls of those past efforts."

In addition, the AICPA points out that the IRS already has significant tools available that, if used, should ensure reduced errors and proper registration. For example, the tax agency can assess penalties against the tax preparer for understatement of a taxpayer's liability and for failure to furnish a copy of a tax return. Using the tools they've got instead of reaching for new regulation will prevent placing too much of a costly burden on tax preparers.

Some argue that this added cost to tax preparers will ultimately be detrimental to taxpayers. Many taxpayers who visit mom-pop tax shops do so because they can't afford to pay a CPA or EA for the service. Raising the standards on all tax preparers may reduce errors – though as noted above, the AICPA doubts this – but will cause tax preparers to raise their prices and that may result in taxpayers foregoing any help at all. The move to regulate may also force some practicing tax preparers to close their doors, limiting the choice taxpayers have for low cost assistance.

Still other voices say that the IRS needs to realize, the reason people go to tax preparers for relatively simple tax returns is because of the gross complexity of the tax code. If the IRS is going to impose heavy regulation on tax preparers, therefore causing them to raise their fees, they should perhaps also pitch in to provide additional public assistance at tax time. One voice suggested they hire part-time workers like those hired to help with the census. Another alternative is that the IRS could consider providing the required training for volunteers.

It's clear that with a tax code as complex as ours and so much at stake... something needs to be done to increase accuracy. But organizations like the AICPA and the Oklahoma Society of CPAs are calling on the Internal Revenue Service to avoid taking steps that they feel will, in the long, run be detrimental to taxpayers.

Read the opposing view: The case for regulating unlicensed tax preparers

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