Some interesting figures

[Black Bart]

No, no -- not girls or skating; but recently published statistics for the just past tax season:

(1) 31 million returns were DIY home e-filed -- 19% more than last year.
(2) Total number of professionally-prepared returns (59 million) was down just a tad (only 5K -- but still, a negative).
(3) E-filing gains/ paper declines. Of all returns (132 million) submitted, 69% were e-filed -- up from 61% last year.

The numbers are surprising -- I remember when almost nobody (except office people) did their own and now 31 million DIYers! Hard to believe, but apparently TurboTax makes all the difference nowadays.

I knew somethin' was eatin' those clients.

[erchess]

Times Are Hard

in fact so hard that a lot of people are unable to afford health care at all or at least not until they are sure they are desperately ill or severely injured. A lot of people are trying to do their own returns or going to kitchen table preparers who usually don't sign as paid preparers even though they are. The existence of DIY software increases this trend. The question in my mind is what will help. I have some ideas.

1. I think we do need minimum requirements to enter the profession set at the National Level with States free to set more stringent requirements if they so desire. The harder it is to get in a position to compete with me the more I am in a position to charge. That is true whether I play basketball or guitar or treat sick people, fix cars, or do taxes. Even without step two below there will always be some people wanting genuinely professional tax advice and willing to pay market price for that advice.

2. The IRS needs to find the preparers who are not signing and those who are doing other fraudulent things and slap them down hard. Professional Organizations seem like the only way to possibly get this done so everyone in our business should belong to at least one. One simple way to find hidden preparers would be to fix it so that people who pay for preparation suffer less for a given error on their returns than those who self prepared even if those who paid a professional freely admit having known all along that what was done was wrong and the self preparers appear to have made honest mistakes. I'm not saying to increase penalties on us but I am saying to cut them on our customers and/or increase them on the self prepared.

3. Every professional who is not under Circular 230 already should be working to get there or working under someone who is there. Firms need to advertise throughout the year that they can help with notices whether they prepared the returns or not.

4. I personally think that we need to share with our clients what it costs to be in business. Your business clients probably have a good idea of what it costs you to rent office space and pay the utilities and make payroll but your other clients don't and none of them have any idea what you spend on preparation and other software, research tools, continuing education, and so on. They don't have any idea how many hours you put into your continuing education each year.

[Uncle Sam]

Some interesting figures

Erchess -
For all the reasons you mentioned, that's why it's even MORE important than ever, to have IRS REQUIRE licensing of tax professionals - by requiring them to submit to a written exam.
Only then is there conformity to Circular 230 standards by ALL preparers.
We can't get to everyone - for example - those that only prepare a few returns for family and friends as a courtesy - but we can force those that prepare for compensation for others as a business activity.
One basic formula that someone on another board rejects is:
Licensing = Competency

While that isn't 100% true, it does curtail the abuses of those in the tax preparation business who don't and are not presently required to conform to professional standards.

I do approve, and never actually thought of it before, as you suggested, to have some protection for those who have been harmed - something like SIPC (Security Investor Protection Corp). But we first have to get to step 1 of requiring licensing before we can consider that idea.

[dsi]

Just like DA's, if you cannot afford a cir230 tax professional, one will be appointed to assist you ( and theIRS will pay the tax prof for his/her services). That's how it should be IMHO. This way, all returns will be prepared by tax professionals, and all tax professionals will get compensated, and all returns will be more accurate (we hope).

[Uncle Sam]

Some Interesting Figures

Yeah - I can just imagine this - taxpayer at IRS audit unrepresented:

IRS: You are guilty until proven innocent. You have the right to remain silent. Anything you say may be used against you in the tax court of law. You have the right to a Circular 230 tax practitioner. If you can't afford one, the tax court will appoint one for you.

Taxpayer: What's a Circular 230 tax practitioner?

[taxmandan]

Now, in the interest of full disclosure, theIRS needs to release the numbers on audits. What percentage of DIY returns that are audited result in significant change and how much $$$ is collected from those audit results. Audits of professionally prepared returns result in how much more $$$ from changes in audit? I bet theIRS is loving the DIY returns, lots more penalties and interest collected on those 'errors.' At least that's the comment from an RA I talked to last year.

[erchess]

Three Points

Number one regards the test. It sounds to me as though Uncle Sam means that he wants to drive out of the profession everyone who is not currently governed by Circular 230 or quickly able to pass the EA Exam as presently constituted. I wouldn't be against that but I think the EA Exam is a little harder than it can be and have enough people able to pass it and keep up the numbers of us that the IRS wants. (I could be reading them wrong. There are people on this board who know a lot more than I do about what the IRS is thinking.) I was therefore thinking of an education requirement of say four semester hours each on individual and business taxation in order to do the relevant returns with alternatives of passing a testing program similar to the ones given to the volunteers who do free returns for the IRS and perhaps also with an option of working say a 150 satisfactory hours for a Circular 230 professional. I see this as a lower level of professional than the current Circular 230 Professionals and I'm for it only because I think this is the most restrictive plan we can get through government channels at this time. I suppose it could be compared to the situation in some states where a Dental Hygienist may clean teeth without supervision of a Dentist but must refer to a Dentist clients needing other Dental Services such as fillings.

Number two, the idea of putting all professionals under the tax preparation rules of Circular 230 is great and could be done independently of anything else. .We would need to be clear that we were not making it any easier to obtain the ability to represent clients but were simply putting everyone who prepares a return for someone else for money under the same set of expectations and consequences..I think the IRS and most Practitioners would go along with this. If this were first implemented and then followed up with enforcement the number of dishonest and incompetent professionals could be greatly reduced..

Number three, I love the idea of a program under which I could get paid a fair price for providing services to low income taxpayers. The problem as I see it is that HRB JH and similar storefront firms will need to be sold on the notion that this is good for them. I think it actually would be good for them but I fear they would be resistant because they would not wish to have their fees restricted.

[luke]

Very interesting

discussion on very interesting subject - THANKS guys!