Tax Preparers Represent Taxpayers

[Bees Knees]

Former IRS Commissioners have made a case as to why tax return preparers should be considered “representing” taxpayers before the IRS when they prepare a tax return for the taxpayer.

http://www.thetaxbook.com/updates/TheTaxBook/Updates/2013-04-19_Former_Commissioners_Preparing_Tax_Returns_Is_Representation.pdf

I think it is an interesting read in that the government is finally acknowledging the important role tax preparers play in administering our tax system. They are in effect admitting that without tax professionals, the government could not effectively implement public policy through the tax system.

[erchess]

Goos Read

To me they made a persuasive case for why Congress should give the IRS the power to regulate all paid preparers. However they in my opinion failed to make a persuasive case for why the courts should hold that congress has already given the IRS that authority. Remember that government regulators must in the interest of liberty be permitted to exercise only those powers that the law indisputably gives them.

I'm all for what the IRS tried to do and I admit that until the recent court decision I overlooked what I now believe to be the fact that the IRS overstepped the limits of its authority.

[taxea]

To me they made a persuasive case for why Congress should give the IRS the power to regulate all paid preparers. However they in my opinion failed to make a persuasive case for why the courts should hold that congress has already given the IRS that authority. Remember that government regulators must in the interest of liberty be permitted to exercise only those powers that the law indisputably gives them.

I'm all for what the IRS tried to do and I admit that until the recent court decision I overlooked what I now believe to be the fact that the IRS overstepped the limits of its authority.

I am all for it too but in reading the code the IRS doesn't presently have the authority and Congress has to pass a law giving it to them

[taxxcpa]

I think it is an interesting read in that the government is finally acknowledging the important role tax preparers play in administering our tax system. They are in effect admitting that without tax professionals, the government could not effectively implement public policy through the tax system.

In effect, the IRS is imposing an additional tax (fee) since the tax laws are too complicated for the average Joe Sixpack to be able to file without using a paid preparer. So, why not make the tax preparation fee a tax credit?

[Bees Knees]

In effect, the IRS is imposing an additional tax (fee) since the tax laws are too complicated for the average Joe Sixpack to be able to file without using a paid preparer. So, why not make the tax preparation fee a tax credit?

Well, maybe because it is already a tax deduction.

[Bees Knees]

However they in my opinion failed to make a persuasive case for why the courts should hold that congress has already given the IRS that authority.

I believe they have the authority under a different statute.

Congress says in IRC §6695 that a tax return preparer must sign a tax return prepared for a client and provide his/her identification number on that return, or pay a $50 per return penalty.

Congress also says in IRC §6109 that the identification number for a tax return preparer shall be whatever the IRS prescribes that number to be. The ID number for a taxpayer can be his/her Social Security number, but the ID number for a tax return preparer can be something other than the Social Security number, as prescribed by regulations.

Thus, at one time, IRS regulations did allow us to use our Social Security number as our ID number on a client’s tax return. But then later, IRS regulations were changed to require us to use PTINs, and in Brannen, the 11th Circuit Court of Appeals on June 7, 2012 ruled that the IRS does have statutory authority to require tax return preparers to use a PTIN and to pay a fee for the privilege of obtaining that PTIN.

Thus, since IRS has the statutory authority under Section 6109 to require the use of a PTIN and HOW to obtain such PTIN, I think the IRS should have used that power to enforce their RTRP regulations. The IRS could have said through their regulatory power that to obtain a PTIN, you also have to demonstrate competency, such as being a CPA, EA, attorney, or passing the RTRP exam, and take CPE each year.

[ChEAr$]

Since IRS already HAS the authority to regulate preparers via various penalties and sanction, what more do they need under exiting law? IRS has the means to detect multiple filings from one address for example (which apparently it didn't do in Tampa in 2012), but of course those returns were probably all self prepared ifyougetmydrift.

Now the idea of requiring all preparers to exhibit competence IS a good idea, and our congress, it it's finite wisdom, should pass such a law.

As for representing a taxpayer merely by signing as preparer, it is still the taxpayer who bears the brunt of misrepresentation. If the taxpayer however gives the preparer a POA to file a return FOR him, then IRS position would be correct.

[taxxcpa]

Well, maybe because it is already a tax deduction.

Not really for most people.
And a deduction doesn't cover the cost of tax preparation, but a credit would.

[WhiteOleander]

Not really for most people.
And a deduction doesn't cover the cost of tax preparation, but a credit would.

That opens the door to the gov't telling us what we can charge. If I charge 100.00 for a return and the guy down the street charges 200.00 for the same return, the gov't will decide what is a "cap". Then our clients will say that the cap is all they'll pay. Not everything needs to generate some sort of deduction or credit. We need less gov't control not more.

[taxea]

In effect, the IRS is imposing an additional tax (fee) since the tax laws are too complicated for the average Joe Sixpack to be able to file without using a paid preparer. So, why not make the tax preparation fee a tax credit?

Why? They already get a deduction and if Congress passes what they have written recently anyone and everyone who prepares a tax return will have to be registered and be subject to a form of Cir 230. I for one am thrilled.

[Bees Knees]

Not really for most people.
And a deduction doesn't cover the cost of tax preparation, but a credit would.

Not all credits are 100% dollar for dollar credits. And some credits provide no benefit, if the taxpayer already has a zero tax liability before the credit.

The 20% dependent care credit, for example, is worse than a tax deduction for a taxpayer in the 25% or above tax bracket, assuming day care expenses don’t exceed the dollar caps.

As for the tax deduction not benefiting everyone, Congress decided years ago to simplify the tax code by allowing a standard deduction. They said, rather than having to add up all of these different deductions, we will give you the first so many thousands of expenses for free without having to substantiate any of it. They also phased out low deduction amounts through the use of AGI limitations, again for the purpose of tax simplification. The so called free deductions like the standard deduction and personal exemptions are provided merely for the sake of tax simplification, but are still based on the idea that people incur otherwise deductible expenses like tax preparation fees.

You see this with politicians calling for tax simplification. They want to do away with all of these different deductions, like home mortgage interest and charity, and flatten the tax rates so that tax preparation is simple. In exchange, there is some huge new exemption amount that is supposed to replace all of these deductions.

[Burke]

You see this with politicians calling for tax simplification. They want to do away with all of these different deductions, like home mortgage interest and charity, and flatten the tax rates so that tax preparation is simple. In exchange, there is some huge new exemption amount that is supposed to replace all of these deductions.

Which is a marvelous idea, and in fact, it is coming to pass for a great many clients with the indexing of the standard deduction and exemption amounts, especially for those over 65 who don't have large medical deductions. Also many younger clients have re-fi'd either for 15 yrs and paid off their mtges, or re-fi'd at such low interest rates, they no longer have enough to itemize. The key word in this is "politician." Itemizing is being relegated to only the high-income earners, who also seem to have a substantial influence in Congress.
This does not address the myriad credits for low-income earners. If the rates are low enough, most other credits can be obviated.

[Golden Rocket]

Auditors

This thread was started by Bees to reflect the thinking of people who still believe tax preparers should represent clients. The thread caught my attention because this belief may be becoming obsolete or going the way of dinosaurs.

And why not? Maybe the referenced report was felt necessary because some in the IRS believe we should be an extension of the
IRS audit division. And also believe in using registration as a means to that end.

If there weren't sleazy people in the tax prep business, there would not have been support for registration except for the gratification of
control freaks in the govt. Those of us who try to do a balanced job in reporting have often lost business to these shysters, but somehow
they will find a way to stay in business.

Various conversations and e-mails within the IRS have been intercepted which purport to the effect that they will turn the tax preparation industry
to do their bidding for them. This as opposed to spending extra money to expand their audit staff, or better yet, send them out into the field.
Repeatedly, their "official" position is that they do not expect us to audit.

They don't want us to audit, but they do want us to examine a client's auto log. They don't want us to audit, but do want us to look at statements from charities to validate charitable deductions. They don't want us to audit, but expect us to do "due diligence" with a longer list of things to look at every year that passes.

I'm ready to hang it up if I get a penalty because I haven't done an audit procedure. I will be representing the client, but will not be cheating for them. I will not complete a return if it means taking a ridiculous position for a client. I am not one of the aforementioned sleazy preparers. I will even state that as a rule my clients are more honest with the government than the government is honest with my clients.

[Bees Knees]

And why not? Maybe the referenced report was felt necessary because some in the IRS believe we should be an extension of the
IRS audit division. And also believe in using registration as a means to that end.

It certainly feels like IRS wants us to do their work as auditors.

But I think even more important is that IRS is admitting they can't administer the tax system by themselves. Congress has put an unreasonable burden on them by implementing public policy and welfare programs through the tax system. A burden that forces them to rely on the help provided by paid tax return preparers.

[taxea]

Doesn't Cir 230 explain "representation of a client" refer to audit, OIC, tax court, appeals representation rather than just preparing and "presenting/filing" a return for the client. I believe that this is why EA/CPA's use F2848 while other preparers use the 8821(?).