Taxpayer Advocate Nina E. Olson is putting new pressure on lawmakers to establish nationwide standards that would weed out bad-apple tax practitioners and serve to protect the more than 60 percent of taxpayers who rely on paid tax preparers.In bluntly worded testimony suggesting that she is losing patience with both Congress and her own agency, Olson called on the House Ways and Means Committee to move forward on proposals to rein in rogue tax preparers and protect American taxpayers from other forms of abuse.
“At present, anyone can prepare federal tax returns; there are no standards at all. Preparers should be required to pass a basic competency test and take periodic continuing professional education courses,” she told the panel. “Greater accuracy in return preparation will benefit both taxpayers and the IRS.”
Olson’s proposal for new federal competency requirements for income tax preparers was advanced as part of a broader “Taxpayers Bill of Rights” that she urged lawmakers to enact.
This wasn’t Olson’s first effort to coax reluctant legislators to broaden protections for taxpayers, or to seek new national standards for tax preparation practitioners. But her latest appeal to the House tax-writing committee displayed a touch of exasperation.
Although both the House and Senate have come close to enacting a series of taxpayer protection bills since passage of the IRS Restructuring and Reform Act of 1998, “There has been no significant legislation in the taxpayer rights or tax procedure arena over the last 10 years,” she told the committee.
Olson’s plan to establish competency standards for tax practitioners was part of a larger Taxpayer Bill of Rights proposal that she presented to Congress last year. Similar initiatives to crack down on corrupt or incompetent preparers have drawn support from the IRS’s own Taxpayer Advisory Group.
“Unscrupulous preparers can defraud the taxpayer in various ways, including identity theft, by having access to personal information,” the TAP told the IRS. “Paid tax preparers should be subject to a basic background check ... to identify persons who have previously been convicted of financial crimes or other activities that should preclude them from having access to taxpayers’ personal and financial data.”
NOT US, RIGHT?
For their part, representatives of the nation’s accountants and other tax professionals have given at least cautious support to such proposals, provided that Circular 230 practitioners such as CPAs, tax attorneys and enrolled agents are exempted from any new tax preparer registration requirements.
Last year, the American Institute of CPAs offered conditional support for Senate legislation to regulate tax preparers, but voiced concerns that it could give the IRS an incentive “to initiate overzealous and inappropriate enforcement actions against tax professionals and the preparer community.”
Representatives from the National Association of Enrolled Agents told Congress that their group strongly endorses the concept of regulating all unenrolled paid return preparers, and would support requiring an initial test for competency, background checks, annual minimum continuing education requirements and compliance with the current Circular 230 ethical standards.
Olson testified that her recommendation for new minimum standards for tax practitioners is only one in a series of protections that Congress ought to establish for taxpayers.
Additionally, she called for steps to increase electronic filing by allowing taxpayers to prepare and file their returns electronically without having to pay a fee to private vendors.
“The IRS should make an e-filing template available and develop a direct filing portal,” Olson told lawmakers. “A direct filing portal will not only attract taxpayers concerned about costs, but will also re-assure taxpayers who have data security concerns about routing their personal tax information through third-party vendors.”
In addition to her call to expedite tax return preparer standards, Olson also called for new initiatives to:
* Protect low-income taxpayers by regulating refund anticipation loans, especially by prohibiting cross-collection agreements;
* Reduce the burdens on partners in partnerships by advancing the initial partnership return filing deadline from April 15 to March 15;
* Protect low-income senior citizens by exempting Social Security payments from levies or by requiring the IRS to develop and utilize an effective screen so that levies are not automatically imposed on taxpayers who are likely to suffer economic hardship; and,
* Simplify the computation rules for the “Kiddie Tax.”
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