Paul L. Caron

Monday, May 13, 2013

Olson: Loving and Tax Return Preparation

Tax Analysts Nina E. Olson (National Taxpayer Advocate), More Than a 'Mere' Preparer: Loving and Return Preparation, 139 Tax Notes 767 (May 13, 2013):

Each year, tens of millions of taxpayers hire paid practitioners to prepare their Form 1040-series returns because of the overwhelming complexity of the tax code and the amount of money at stake. That has led to significant concerns about incompetent and unscrupulous preparers and their negative impact on taxpayers and compliance. The IRS and Treasury had developed and substantially implemented standards governing preparers when, in Loving v. IRS, a U.S. district court found that Treasury lacked the authority to issue the regulations. The government has appealed the case to the D.C. Circuit. The NTA believes that the district court’s decision in Loving is based in part on an outdated understanding of return preparation and filing. This report makes the case for preparer regulation generally, explains where the district court erred, and illustrates how problems in today’s tax system are directly analogous to the problem Congress sought to address in its original grant of regulatory authority to Treasury. 

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Each year, hundreds of millions of American motorists hire paid mechanics to maintain and repair their cars and trucks because of the overwhelming complexity of motor vehicles and the safety of drivers and passengers at stake. That, however, has not led to significant concerns by the federal government about incompetent and unscrupulous technicians and their negative impact on property and lives.

The difference between the vehicle repair industry and the tax industry, of course, is that the federal government has a direct financial stake in tax collection. The relationship between tax collection and tax practitioner competence, however, has not been great enough to induce Congress to expand IRS regulatory powers. Why must IRS officials -- including the Taxpayer Advocate, who reports to the Commissioner -- recite this tired litany of, "We are from the government and we want to protect you"? There's nothing wrong with admitting that the objective is revenue enhancement.

Posted by: Bob | May 13, 2013 7:09:41 AM