Tax-return preparers may soon be subject to training, licensing and federal oversight.
Right now, anybody and their mama can set up shop and prepare tax returns. As you can imagine, this can lead to fraudulent and inadequately prepared returns. Internal Revenue Commissioner Doug Shulman wants to fix this problem.
There are tax professionals — lawyers, certified public accountants and enrolled agents — who are licensed by state or federal authorities and are subject to censure, suspension or disbarment from practice before the IRS in the event of wrongdoing. Yet for a large group of commercial preparers, there is virtually no training, no licensing and no federal oversight, said Nina Olson, the national taxpayer advocate.
Some states such as California and Oregon require commercial tax preparers to be trained and licensed. Last year, Maryland passed a law creating a new licensing and regulatory program under which individual tax preparers must be licensed by June 1, 2010.
However, because only a handful of states regulate preparers, Shulman sees the need for licensing to be uniform and perhaps federally regulated.
The commissioner wants to have a set of recommendations ready by the end of the year to hand to the Treasury secretary and President Barack Obama.
“Tax-return preparers help Americans with one of their biggest financial transactions each year,” Shulman said. “We must ensure that all preparers are ethical, provide good service and are qualified.”
Shulman said he wants input from taxpayers, preparers who are licensed by state and federal authorities, and unlicensed tax preparers and tax software vendors.
Later this year, Shulman said the IRS plans to hold a number of public forums in Washington, D.C., and around the country. Information about these meetings will be posted on the “Tax Professionals” page at www.irs.gov.
It’s about time this was put on the top of the agenda for the IRS.
Although many tax professionals do their jobs well, there are enough unscrupulous preparers to warrant some changes, especially given the more than $300 billion estimated tax gap from people who should pay but don’t.
Olson has been calling for more oversight, training and licensing of commercial tax-return preparers. In her most recent report to Congress, she recommended that Congress enact a federal registration, examination, certification and enforcement program for unenrolled tax-return preparers.
“Preparers occupy a position of trust and can facilitate compliance with the laws, or alternatively, can influence the taxpayer to take aggressive or even unlawful positions on tax returns,” Olson said in another report laying out 2009 fiscal year objectives.
Even if you didn’t know your return was fraudulently prepared, the IRS still holds you responsible. Ignorance won’t get you out of trouble. If the IRS catches a fraudulent return, it’s the taxpayer, not the preparer, who has to pay any additional taxes, interest and penalties.
Although individuals are held responsible for what’s on their tax return, the IRS does go after bad preparers. The IRS can assess civil penalties against deceitful return preparers. The agency also refers criminal activity by return preparers to the Department of Justice for prosecution. In fiscal year 2008, 124 tax-return preparers were found guilty of fraud.
Although the IRS is catching many tax cheats, greater scrutiny, licensing and regulation could bring in more tax dollars. And lord knows the country needs the money.
Washington Post Writers Group
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