The Senate Finance Committee has been trying to decide whether or not to give the IRS the authority to regulate tax preparers. Senator Elizabeth Warren and others have proposed that the IRS be required to fill out simple tax returns. That would deal the “Free File Alliance,” led by companies like Intuit, H&R Block and Jackson Hewitt a major blow. The decision has deadlocked Congress and Warren’s bill is stalled. Kevin Thompson, CPA states “I like the idea that the IRS fill out the simple tax returns. They have all of the data for these returns. They can prepare and send a copy to a taxpayer with a “if you disagree …” letter and we can be done with that return and the millions like it.”
The question is; are continuing education, and tests for tax preparers the answer or would another solution be more effective?
The IRS has tried in the past to impose regulation on preparers without success. Wouldn’t it be a better solution to get rid of bad preparers who may cause financial disaster for their clients? Thompson says “again, I like the idea of getting rid of the bad preparers. What I don’t like is that the people making and enforcing the rules get to decide who is bad. Seems like a conflict of interest to me.”
The way it works now, the IRS can’t regulate tax preparers before they start preparing returns. The majority of states allow anyone to become a return preparer without a test, with minimal education, and without a background check. The IRS and Department of Justice can take bad preparers to court, but only one at a time. If several all work in the same practice, they can still continue to do bad work even if a partner is ordered by the court to stop. Injunctions take time and much effort to shut down bad companies. Often it takes years.
It’s like trying to pull up weeds individually rather than killing them all with Roundup. Also, if you don’t get the roots, they pop up again. Thompson adds “maybe tax preparation needs Peer Review. Maybe the IRS together with the AICPA and the NAEA can create a program to monitor this.”
It’s not that it’s a bad thing to try to get rid of bad tax preparers one at a time. It’s the system that is the problem. Bad preparers should be cut off while good preparers should be able to continue doing what they’re doing. A good preparer doesn’t need to go to mandatory training because they naturally keep up with updates in the tax laws to run their businesses successfully. They need support instead.