Paid Tax Preparers May Need Licenses

In this year's annual report to Congress by the Taxpayer Advocate Service, an independent organization that operates within the Internal Revenue Service and serves as a watchdog to make sure the IRS is handling taxpayer problems efficiently and effectively, one of the more progressive themes is the concept that there should be a push to license paid tax preparers.

Currently it is estimated that at least half of the nation's taxpayers pay to have their tax returns prepared by someone else. And while the IRS is encouraging taxpayers to file online and, presumably, refrain from using the services of a tax preparer, the paid tax preparation business continues to flourish, due in large part to the fact that tax laws are simply too complicated for most people to understand.

At present there are no national standards for tax return preparers. Anyone can charge for the service without proving that he or she has had any training in tax preparation or even any particular knowledge of the tax laws. Currently, only lawyers, certified public accountants, and enrolled agents are subject to regulation by either the IRS or a state licensing agency.

The Taxpayer Advocate's report includes the recommendation that a licensing, registration, and enforcement program be created for anyone other than a lawyer, CPA, or enrolled agent who charges a fee for the preparation of more than five federal tax returns in a single year. "Taxpayers are ill-equipped to assess the competency of someone's expertise in an area in which they have limited knowledge themselves," wrote National Taxpayer Advocate Nina E. Olson in the report to Congress.

"Some tax preparers intentionally disregard the tax laws, or fail to solicit the correct information from the taxpayer to obtain erroneous refunds and larger service fee," reads the report. "While there are many reputable tax professionals that assist their clients with return preparation, there are also those who provide less than accurate information, causing clients’ refunds to be 'frozen' and their claims disallowed.

"Establishing standards and procedures for registering and certifying tax preparers under IRS guidelines may be one way to reduce fraudulent claims and produce a higher percentage of error free tax returns," the report continued.

You can read the complete report.

You may like these other stories...

The law makes it difficult for itemizers to deduct medical expenses. To reap any write-off, you must pay bills that aren't covered by insurance, reimbursed by employers or otherwise satisfied by, for example, a company-...
Drug patents held overseas can pare makers’ tax billsAs the Obama administration tries to stop companies from avoiding taxes by moving their headquarters overseas, the makers of some of the world’s most lucrative...
Starting in October, the IRS will send warning letters to tax return preparers who appear not to be complying with Earned Income Tax Credit (EITC) due diligence requirements.Section 6695(g) of the Internal Revenue Code...

Already a member? log in here.

Upcoming CPE Webinars

Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.
Oct 23Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.