A pair of Republican lawmakers have introduced legislation to require professional tax preparers to undergo examinations, take annual continuing education classes and submit to a background check.
[IMGCAP(1)]The Tax Return Preparer Competency Act, introduced by Rep. Diane Black, R-Tenn., and Pat Meehan, R-Pa., aims to reduce tax preparer fraud. Black and Meehan pointed to the IRS’s “Dirty Dozen” list of tax scams for 2015, which warns of “dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.”
They noted that tax preparer fraud raises particular concerns for the earned income tax credit. A Treasury Inspector General for Tax Administration report found the IRS may have issued more than $15 billion in improper EITC payments in 2013 alone. The National Taxpayer Advocate estimated that more than 76 percent of preparers who prepared returns claiming the EITC did not have a professional credential.
“As a result of our mammoth tax code, an estimated 80 million Americans turn to tax preparers to assist in filing their yearly returns,” said Black in a statement. “Today, however, there are no minimum standards to stipulate who can charge for these services. This lack of accountability puts Americans at unnecessary risk and contributes to rampant improper payments within the tax system. While Congress continues working towards a fairer, flatter, simpler tax code that will enable more Americans to complete their taxes on their own, we must also act now to rid out fraud and protect taxpayers from fly-by-night tax preparers who lack a basic background check and the requisite training to handle Americans’ most sensitive information.”
The Internal Revenue Service tried to require continuing education and competency examinations for tax preparers in its Registered Tax Return Preparer program, but a federal court in 2013 invalidated the program, ruling in the case of Loving v. IRS that the IRS had exceeded its statutory authority. A federal appeals court later upheld the ruling. Since then, the IRS has introduced a voluntary program for tax preparer education, known as the Annual Filing Season Program. CPAs, Enrolled Agents and tax attorneys already are subject to examination and continuing professional education requirements in order to practice before the IRS.
In January, a pair of Democrats in the Senate, Sen. Ron Wyden, D-Ore., and Benjamin Cardin, D-Md., introduced a bill to give the IRS the authority to regulate all tax preparers (see Senators Unveil Bill to Regulate Tax Preparers).On Tuesday, Cardin teamed up with another Democrat, Rep. Xavier Becerra, D-Calif., to introduce a bill known as the Taxpayer Rights Act of 2015, which also includes a provision giving the IRS the ability to regulate tax preparers (see Lawmakers Introduce Bill to Protect Taxpayer Rights).
Black and Meehan’s bill aims to assure a minimum level of competency for preparers and prevent tax fraud. It would also authorize the Treasury Department to set up a public database of tax preparers, which the IRS has already set up for its Annual Filing Season Program. The IRS’s Directory of Federal Tax Return Preparers with Credentials and Select Qualifications includes the name, city, state, zip code, and credentials of all attorneys, CPAs, enrolled agents, enrolled retirement plan agents and enrolled actuaries with a valid Preparer Tax Identification Number, or PTIN, as well as all Annual Filing Season Program – Record of Completion holders.
[IMGCAP(2)]“A tax burden can dramatically affect a family’s take-home income each month, and Americans take the annual tax preparation process seriously,” said Meehan. “The complexity of the tax code means that many of these families will use the services of a tax preparer to help them ensure they pay only what they owe. When they do that, they turn over a vast amount of their families’ most personal data. They put their trust not only in the tax preparer’s competence – but in its honesty and integrity, as well. They deserve to know their information is safe. This bill is a prudent measure to weed out scam artists and help protect taxpayers from identity theft and fraud.”
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