A letter to IRS Commissioner Douglas Shulman may hold the key to the shape of the recommendations to be proposed before the end of the year on tax preparer registration.
In the letter, a group of organizations representing tax return preparers and taxpayers laid out a set of principles for reforming the tax preparer industry. The signatories represent AARP, the National Association of Enrolled Agents, the National Community Tax Coalition, Padgett Business Services, Maryland CASH [Creating Assets, Savings and Hope] Campaign, and Policy Matters Ohio. Jeffrey Trinca, vice president of Van Scoyoc Associates, coordinated the effort.
Several of these groups were represented at the hearings on tax preparers, noted Roger Harris, chief executive of Padgett Business Services. The point was to get them together and agree on the common elements that need to be included in any proposal, he said. Van Scoyoc Associates was familiar with the different parties, so they organized it to put some support behind the process.
The letter advances four principles that the organizations believe will further the core objective of protecting the American taxpayer: testing and education, strong ethical standards, enforcement and resources, and public promotion of licensed preparers.
Specifically, the group said that paid tax return preparers should demonstrate initial competency through IRS-administered testing, and maintain their knowledge by fulfilling annual continuing education requirements. Attorneys, CPAs and enrolled agents would continue to comply with existing regulations.
The IRS should establish and enforce uniform standards of behavior for all paid preparers, said the group. Enforcement of the new requirements would be centralized under the Office of Professional Responsibility, which should be allowed to collect and retain licensee fees to cover the cost of administration and enforcement. Moreover, the IRS should implement a public outreach program to educate both consumers and prepares. The program would focus on the need for using only IRS-regulated preparers, with a requirement that all paid preparers sign the return and include a valid licensing number.
The group plans to work with the IRS and Congress to ensure that these principles are part of any future reforms.
This represents a core group that supports strong oversight of all paid preparers, and the fact that the same group agrees on what regulation should look like, said Trinca. The AICPA isnt in the group because their interest is in protecting their brand, and they feel that they have a gold standard when it comes to tax preparation.
While the prevailing thought originally was that legislative changes would be necessary for the projected changes, Trinca believes that reform could be accomplished at the administrative level. The entire Circular 230 regs flow from a paragraph in Title 31, he noted. The thought that you have to go to Congress to get a mandate is just not correct. Anyone practicing before the Treasury Department can be regulated, and from that principle flows all the regs on testing, continuing education and enforcement.
The recommendations, due out in early December, will possibly be in a form similar to the first stage of a regulation. There may be a comment period, or a listing of what the IRS needs to do, and what Congress needs to do, said Trinca. Our letter is in some sense a letter to Congress as well.
The essential ingredients are education and enforcement, according to Harris. You cant just add two people to OPR and say, Go figure it out, he said. They need a budget, staffing and a way to raise the money.
Public promotion of the requirement to use a licensed preparer is essential, said Trinca. Explain to the public that its not just good for them, its also the law. Make sure you use a licensed preparer and that they sign you return put it on the sides of buses and at places where people will read it.
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