Enhanced Regulation of Paid Tax Return Preparers

[Chief]

This topic has not been in the limelight lately so I though I would bring it up once again.

I have heard of several tax preparers who are telling their clients when regulation becomes a reality they will begin to mail their returns to IRS as self-prepared returns. A bowl will be placed on their desks for contributions from their clients for doing their returns. Again I have heard of several tax preparers who refuse to use any computer software or efiling for the returns that they do. Even in this day and age there are tax preparers who remain afraid of computers and anykind of automation in their work. Attitudes such as these are very hard to change. I have no answer to this delimena in our profession. Do you?

I just read an excellent paper on the regulation of tax professionals by Larry Gray, CPA. This paper is available on the NATP website, and you do not have to a member to access it. Type in NATP into Goggle or other search engine that you use. This paper was written and presented to the House Sub-Committee on Oversight and is dated July 20,2005.

I hope that the final regulations will also take into account "test phobia" that some people have including me. One interesting part of this paper points out the small percentage of nonpersonal tax returns filed as compared to the large percentage of personal tax returns filed. "There are approximately 131 million individual returns prepared annually compared to 6 million corporate returns, 2 million partnership returns and 1 million gift, trust and excise tax returns." Mr. Gray states, "That it is not reasonable to test specialists in areas that they do not practice.

It is my position that we as tax professionals have everything to gain with some form of licensing of tax preparers. Most importantly the public does too.

[Donanita]

I agree

that tax prepares should be licensed but I to have a test phobia. I have not taken the EA examine for this reason. Oh the stress. I have been a tax preparer since 1985 and have taught tax classes but have but off the exam.
If this bill passes it will only cause tax prepares to go "underground" preparing returns and not signing and reporting the income.
I have 6 more yrs I would like to work but if law passes guess I'll do a early retirement.
I joined NSTP last yr as Tom Cook lobbies for the unenrolled preparer as he also thinks you will have tax preparers doing returns "under the table"

[Snaggletooth]

Regulation?

Consider all the other industries regulated by the government, and how effective it is. Everything from the price of commodities to the Immigration & Naturalization Service. Another chance for bureaucrats to flex their muscles on a pick-and-choose basis and draw paychecks and fat government benefits for doing nothing. Bureaucrats who get into the lucrative and sometimes under-the-table APPROVAL business.

Actually, the abuses they think to control are already within their power, but they want someone else to do their work for them. Examples:

1. Computer-generated letters from their examination division. Your customers get them every year - and 50% of them are wrong. No chance of talking with a live person or getting anything done about them. I have to roll through the wickets and finally resolve many of these with their Tax Advocates. Notice all the "work" is done by the computer and no effort whatsoever by the service to expend any real work to clean up their mess.

2. Audits. I have a small clientele base, but I used to have an audit every year or two, sometimes more than one audit. I still do over 100 (complex) returns, and have had maybe two audits in the last 12 years. Maybe I should be flattered, but I don't think I have anything to do with it. IRS can get back into the audit business, and abuses by taxpayers will dramatically decrease. I've been in the business over 30 years and can tell you the general public is virtually non-chalant about reporting income and taking questionable deductions than ever before. Tell them they could get audited and it doesn't phase them. Years ago, it was different. IRS could accomplish their objective if they just get out and WORK - but God forbid. Easier to try to hogswaggle preparers into being their auditors. That's what this is all about.

3. Whistleblowing. The general public is offerred a percentage of the collection if they turn in their friends and neighbors. They can give the IRS "tips" and the service will track down the evildoers and punish them sore afraid. Tax preparers have a golden opportunity here, more so than anyone else. Because it is a very bad business practice, I won't do anything of the sort. However, I know a few people who have tried -- and here's what happens: The "tip" is given, with ample information as to where to go. But the IRS responds that they want the whistleblower to give specific dates and times, collect and copy documents, and assemble personal information about the violator. The whistleblower is promised anonymity, but with the specific details the violator will know the only person in a position to have specific knowledge is YOU. The guy giving the "tip" must essentially do all the resource so the auditor/prosecutor expends zero effort making his case. At some point, the Service tells the Whistleblower, "We're not in the business of going after people to satisfy someone's grudge against someone else."

As you can see, this whole matter of transferring responsibility to the preparer is part of an effort to keep the IRS from expending its own resources and doing any WORK. We could all be more successful in preparing returns from more honest clients if the IRS would just simply DO ITS JOB.

The unscrupulous and incapable tax preparers who ignore unreported income and take abusive deductions would dry up in five years if this happened. If this is their objective, then why don't they DO THEIR JOB? I believe their REAL objective is to set up another administrative superstructure and push the WORK onto people like ourselves.

I work for my customers and not for the IRS. And I don't break their rules and let my clients reap where they haven't sown. I don't need to be jumping through their hoops and being smacked in the face because I don't want to do their work for them.

[Bees Knees]

The reason our tax system is called a voluntary system is because without the taxpayer and the tax professional’s cooperation, the system would collapse. The IRS cannot possibly police everyone without our help. There simply is not enough man-power or resources to do the job. So at every turn, they look to us to do it for them. E-file is another example. How many billions has the government saved by being able to reduce the manpower needed in the past to input all of that data?

[John of PA]

Regulation

The problem with Regulation is standard general regulations are passed that apply to all tax preparers, whether a large firm or small firm. We see this with regulations for CPA audit work. It is unfair for a small pratitioner to have the same regulations as a large pratitioner. Ex: everyone must file electronicaly, or everone must use a Document Management System (paperless). This type of thing will come with regulation. I favor regulation, but only if the small pratitioner is exempt from rules that are impractical for them.