The discussion about DocuSign and electronic signatures got me thinking, and I decided to start a new topic about this…
I believe in electronic filing, and in my posts in the thread about DocuSign, I said that I am slowly and cautiously moving in a paperless direction for everything in my professional and personal life.
With that being said, it dawned on me that the totally paperless self-select PIN process is indirectly facilitating, supporting, and enabling the shadow industry of tax preparers who don’t sign the returns that they prepare.
They use DIY software. They file the returns electronically using a system that identifies the returns as self-prepared. The client may or may not be aware of this. Some clients may not care. But the fact is that the self-select PIN system makes it possible for the ghost preparer to effectively impersonate the taxpayer throughout the electronic filing process, using DIY software. The client may be sitting right there. If the guy didn’t do the client’s return the previous year, the client may actively assist in the self-select PIN process by providing the necessary data from a prior year return. Or the client may not be present. No matter how it goes, the preparer is not signing the electronic return, and that's what makes it unlawful.
Here’s my point:
As recently as 2008, I think, the IRS was still using something called Form OL-8453. It was a special version of Form 8453 for DIY returns that were not authenticated with a self-select PIN. The DIY taxpayer had to mail the form into the IRS, just like the old days when EROs had to mail in the “regular” Form 8453.
If the IRS really wants to stop shadow preparers who charge a fee without signing the return, here’s how they can do it:
Kill the self-select PIN for DIY returns. Go back to a process that requires a handwritten signature for any DIY return. E-filing would still be available, but the taxpayer would have to mail Form OL-8453, or something very similar, as they did up until 2008.
And—
On the form that has to be signed by the taxpayer and mailed to the IRS, right above the signature, add the following language, in large, bold print:
To be sure, this would not stop the most egregious offenders. Some might just forge the taxpayer’s signature. Others will present the form for the client’s signature, and the client will sign it without reading the large, bold print. Then the tax pro will mail it to the IRS, and they won’t give the client a copy of that form. If the client actually reads it and objects, the tax pro may invent some bogus explanation, such as asserting that their fee is not for the preparation of the return, but rather for their time and advice, or for “helping you use the software to prepare your own return.”
It's not a magic bullet. If someone really wants to do tax returns underground, they’re gonna find a way to do it. As long as there is a demand for cheap, unlicensed service, someone will meet that demand. I’ve paid my neighbor to repair my car, and he’s not a formally trained mechanic. That might be illegal in some jurisdictions. I know it’s not the same. It doesn’t require a professional license. But if the guy doesn’t know what he’s doing, at least in theory, it could result in an auto accident. But I trust him, and he charges a lot less than a licensed, insured repair shop. I am accepting what I consider to be a very low risk as a trade-off for a lower price.
Nevertheless, requiring a mailed, hardcopy signature with strong language like I suggested above might make a significant dent in the underground tax business.
It probably won’t happen. Requiring a mailed form feels like turning back the clock. The perception will be that it defeats the purpose of paperless filing, and adds an unnecessary burden. And the IRS would have to budget for the processing of all those forms…
But the idea looks good on paper!
BMK
I believe in electronic filing, and in my posts in the thread about DocuSign, I said that I am slowly and cautiously moving in a paperless direction for everything in my professional and personal life.
With that being said, it dawned on me that the totally paperless self-select PIN process is indirectly facilitating, supporting, and enabling the shadow industry of tax preparers who don’t sign the returns that they prepare.
They use DIY software. They file the returns electronically using a system that identifies the returns as self-prepared. The client may or may not be aware of this. Some clients may not care. But the fact is that the self-select PIN system makes it possible for the ghost preparer to effectively impersonate the taxpayer throughout the electronic filing process, using DIY software. The client may be sitting right there. If the guy didn’t do the client’s return the previous year, the client may actively assist in the self-select PIN process by providing the necessary data from a prior year return. Or the client may not be present. No matter how it goes, the preparer is not signing the electronic return, and that's what makes it unlawful.
Here’s my point:
As recently as 2008, I think, the IRS was still using something called Form OL-8453. It was a special version of Form 8453 for DIY returns that were not authenticated with a self-select PIN. The DIY taxpayer had to mail the form into the IRS, just like the old days when EROs had to mail in the “regular” Form 8453.
If the IRS really wants to stop shadow preparers who charge a fee without signing the return, here’s how they can do it:
Kill the self-select PIN for DIY returns. Go back to a process that requires a handwritten signature for any DIY return. E-filing would still be available, but the taxpayer would have to mail Form OL-8453, or something very similar, as they did up until 2008.
And—
On the form that has to be signed by the taxpayer and mailed to the IRS, right above the signature, add the following language, in large, bold print:
I certify under penalty of perjury that I have not paid a fee for the preparation of this tax return. I understand that it is unlawful for any person to collect a fee for the preparation of a tax return unless that person signs the return with their Preparer Tax ID Number. I also understand that the software used to prepare this return cannot be used to electronically file a return that has been prepared for a fee.
It's not a magic bullet. If someone really wants to do tax returns underground, they’re gonna find a way to do it. As long as there is a demand for cheap, unlicensed service, someone will meet that demand. I’ve paid my neighbor to repair my car, and he’s not a formally trained mechanic. That might be illegal in some jurisdictions. I know it’s not the same. It doesn’t require a professional license. But if the guy doesn’t know what he’s doing, at least in theory, it could result in an auto accident. But I trust him, and he charges a lot less than a licensed, insured repair shop. I am accepting what I consider to be a very low risk as a trade-off for a lower price.
Nevertheless, requiring a mailed, hardcopy signature with strong language like I suggested above might make a significant dent in the underground tax business.
It probably won’t happen. Requiring a mailed form feels like turning back the clock. The perception will be that it defeats the purpose of paperless filing, and adds an unnecessary burden. And the IRS would have to budget for the processing of all those forms…
But the idea looks good on paper!
BMK
Comment