TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, August 26, 2010

WSJ: IRS Goes Overboard in Regulating Tax Preparers

Wall Street Journal op-ed: The IRS Targets Incompetent Tax Preparers -- That's Good News. But the Agency Is Going Overboard, by Brad Sherman (D-CA) & Michael Conaway (R-TX):

The IRS is out to do something nice for us by ensuring we get quality help when we hire someone to prepare our tax returns. Unfortunately, parts of this laudable effort may be too much of a good thing. By going too far, too fast with more regulation than necessary, the IRS will add needless burden and expense. The agency's goals could be achieved more cheaply and efficiently without stretching its enforcement resources so thin.

Tax attorneys, certified public accountants (CPAs) and enrolled agents already are subject to extensive oversight and testing at both the state and federal levels. But a vast army of others operate with little federal or state supervision and may have little formal training. No independent cop on the beat protects taxpayers from the unprepared preparer. The proposed registration program would bring unregulated preparers within reach of the IRS, enabling it to identify those with a pattern of shoddy work, and, if necessary, act to protect taxpayers. That's the good news.

But the effort is flawed by plans to apply it too widely—going beyond the "signing preparer" (the person who directs and reviews the work and then signs the return) to basically every person who may touch a return.

This approach could require more than a million registrations nationwide, including legions of "nonsigning preparers" at CPA firms that are already subject to intense scrutiny and penalties by state accountancy boards and the IRS. Requiring a PTIN for nonsigners is regulatory duplication that will create volumes of additional paperwork and expense to be passed onto taxpayers—without providing any added protection.

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Can't we get a moratorium on new government regulations and require honest cost/benefit analyses before they are implemented?

Lawyers, CPAs, and non-signing office staff are being caught up in the IRS dragnet for tax preparers without professional standards. It's just one more overly-broad government cost pushed onto the public without an adequate return of benefits.

Every time that someone else does something wrong, honest and competent firms have to unjustifiably pay going forward.

Refer back to Cost of Government Day: Aug. 19, in which the costs of government regulations and mandates are included in the calculation of how long people must work to support the beast.

I'm tired of it, in case you couldn't tell.

Posted by: Woody | Aug 26, 2010 12:18:09 PM

I find it ironic that the very group complaining about the heavy handed IRS has no requirement to take continuing tax education yet has the arrogance to complain that since they passed a test at some point in their distant past that they are competent to prepare returns today. I am a CPA and President of a national seminar company speaking to over 10,000 acting tax professionals every year, with average audiences of 50% CPA's, 10% EA's, 5% attorneys and 35% unlicensed individuals. I find the EA's and unlicensed individuals much more cognizant of the need for quality tax continuing education than most CPA's and all attorneys. Please list for me any state board that requires any CE in tax for attorneys or CPAs, much less the amount needed to maintain the EA license. All hail the new IRS preparer regulations and fie on the AICPA and ABA.

Posted by: Bob Jennings | Aug 28, 2010 4:17:31 PM