Every spring, the average American grabs a shoebox jammed with slips of paper or a neatly organized file and goes to visit their tax preparer, usually a CPA firm or a franchised tax company. Others go to a person referred to by many CPAs as "the barber" - neither a CPA nor an accountant, but someone who, once a year, magically becomes a tax expert. It's a risk for the taxpayer and a revenue loss for the Internal Revenue Service.A cheap return becomes very expensive if it leads to an audit. The non-professional preparer does not sign off on the return, has no accountability for their work, and if anything goes wrong, the taxpayer is on their own.
IRS studies have shown that a significant number of these non-professional preparers do not report all of their earnings, as they are not licensed and their services are performed "off the books." Since they are not operating a business, they are not required to issue 1099 Forms in conjunction with paid professional services. Taxpayers lose again: There is no tax benefit for the payment of tax preparation or audit representation fees, unlike other entities that are permitted a full deduction.
The National Conference of CPA Practitioners recommends that the deduction for tax preparation and representation fees should be deductible on Page One of Form 1040 as an above-the-line deduction. We believe that more taxpayers would insist on deducting the fees if they were confident that there would be a tax benefit. Tax preparers would be encouraged by their clients to sign the return, and therefore would have to report the fees that they earn.
The IRS would collect enough additional revenue from non-reporting preparers to mitigate tax revenue lost by allowing these fees to be deducted. If tax preparation fees become a Page One deduction, require these tax preparers to provide their tax ID number and the IRS can then cross-reference so that millions in unreported income will be accountable.
Another issue to consider: A non-professional preparer has no need to meet standards of security to protect your identity and financial information. This is an open invitation to commit fraud or identity theft, with zero protection for the taxpayer
No tax preparation franchise or "barber" can ever fill the same role as the trusted CPA practitioner who takes full responsibility for their work and truly cares about their client's well being. Big companies or unlicensed tax preparers have their own agendas, which are not necessarily in the taxpayer's best interest.
NCCPAP has been working to educate law and policy makers, testifying at congressional hearings and consulting with the IRS, and has taken the position that Americans are better served when preparers are accountable.
Dennis Scott, CPA, is president of the National Conference of CPA Practitioners and a partner with the Oneonta, N.Y.-based accounting firm of Gruver, Zweifel & Scott LLP.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access