What do your hairdresser (or barber for you manly men who refuse to visit unisex hair salons) and your tax preparer have in common?
In most places, absolutely nothing. And that includes a license to operate.
Juana, who cuts both my and the hubby's hair, has her State of Texas certification
document posted on her station's mirror. Every time I sit in her chair
so she can clip a few inches, I can see that the Lone State State has
deemed her qualified.
But when I pay someone to help me sort trough my federal tax return, neither Texas nor Uncle Sam officially care.
That could be about to change.
By year's end, IRS Commissioner Douglas Shulman plans to propose a comprehensive set of recommendations
to help his agency "better leverage the tax return preparer community
with the twin goals of increasing taxpayer compliance and ensuring
uniform and high ethical standards of conduct for tax preparers."
In plain English, Shulman and his IRS colleagues are looking for ways to
keep tabs on who is getting paid to preparer tax returns and make sure they are doing the job properly.
"When people pay good money, they should not get bad advice," said Shulman.
Troubles with a tax trend:
During a press telephone conference, Shulman noted that changing times
have in part prompted the IRS' examination of putting tax preparers
under a more powerful microscope.
"We've
seen a transformational shift in the U.S. tax system. "Very few people
sit down with pen and paper and fill out their 1040s," he said.
Instead, now more than 80 percent of taxpayers go to a tax professional
or use tax preparation software to help them file their returns."
While
you and I find this is the best way to get our taxes done with the
least possible pain, Shulman and other see a major problem with this
trend: There is no national standard for tax preparers.
On a more local level, California and Oregon regulate preparers in those states.
But in other places, as New Jersey accountant, tax preparer and The Wandering Tax Pro blogger Robert D Flach puts it, "as it now, any cafone can put out shingle as 'tax pro.'"
That's part of the reason that Flach is pro, with some caveats, the proposal to regulate tax pros.
Pro regulating tax pros:
"I support a national 'registration' of unenrolled tax pros plus an
annual CPE (continuing professional education) requirement," wrote
Flach via Twitter.
"I am against requiring all unenrolled pros to take test to be
permitted to continue to practice (as Congress wanted). It would be
literally impossible for the IRS to administer."
Joining Flach in qualified support of tax pro regulation is Florida CPA and tax attorney Peter Pappas. In his The Tax Lawyer's Blog, Pappas writes:
"While I am skeptical of government regulation, I think this is an area that begs for it.
We
have had many clients come to us over the years who have been duped by
unscrupulous or merely incompetent unlicensed tax preparers."
Iowa CPA Joe Kristan, who also is author of Roth & Company's Tax Update Blog sees the issue a bit differently. "I think it will cause more harm than good," Joe told me via Twitter.
At his blog, Joe elaborates on why he has a dim view of the IRS approach, saying in part "the IRS already
has severe penalties that it can impose to deter and shut down abusers.
If the current amount of bureaucracy isn't effective, more and bigger
bureaucracy probably isn't the solution."
Ease into it:
Inept and downright criminal tax preparers certainly need to be shut
down and penalized. But right now, I'm leaning toward a slow approach
to this problem.
I
like the idea of starting with a registry. I suspect if people had to
let Uncle Sam know they were taking money to prepare returns, a lot
would think again. This obviously wouldn't eliminate the out-and-out
scammers and fraudsters, but it could dissuade those who realize that
they really have no business preparing tax returns.
Of
course, you then have to make sure that folks know that preparers are
supposed to be registered and then double check that they are. But more
stringent rules, at least initially, probably would have a limited
effect while adding to IRS administrative costs.
Public meetings on the way:
These are just the kind of issues the IRS wants to sort through before
coming up with any specific way to deal with paid tax preparers.
In
addition to seeking comments from tax pros -- ranging from those
currently without any official credentials to enrolled agents, lawyers
and accountants -- the IRS wants input from consumer advocates,
software manufacturers and individual taxpayers.
I'm
sure the National Taxpayer Advocate Nina Olson also will officially
weigh in. Among Olson's 17 legislative recommendations to Congress in
her latest annual report, she called, once again for federal oversight of preparers.
To gather all the various opinions, the IRS will hold open meetings around the country. The
dates will be posted on the IRS Web site, so keep checking
there -- and here at Don't Mess With Taxes -- for details as they are
made available.
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