Senators unveil bill to impose minimum standards on tax preparers

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Sen. Ron Wyden, D-Ore., and Ben Cardin, D-Md., introduced legislation Thursday to require minimum standards for paid tax preparers and rescind Preparer Tax Identification Numbers of incompetent and fraudulent practitioners.

The bill represents the latest effort to regulate the tax prep industry. The IRS began rolling out a Registered Tax Return Preparer program in 2010 that imposed mandatory registration, testing and continuing education requirements on preparers. CPAs, enrolled agents and tax attorneys have long been subject to competency and continuing education requirements, but much of the tax prep industry has been unregulated, except in a handful of states. The RTRP program didn’t fully get underway until 2012, but a group of independent tax preparers quickly filed suit in the case of Loving v. IRS. A federal court judge ruled in favor of the tax preparers in 2013, invalidating the RTRP program and saying it exceeded the IRS’s statutory authority. An appeals court upheld the ruling the following year. Since then, Wyden, who is the top Democrat on the Senate Finance Committee, and others have introduced legislation requiring various standards for tax preparers, but so far without success.

The latest effort, known as the Taxpayer Protection and Preparer Proficiency Act of 2019, would give the Treasury and the IRS the statutory authority to set federal standards of tax practice for all paid return preparers. It would require certain preparers to meet minimum competency requirements, including obtaining a PTIN; satisfying any examination and annual continuing education requirements; and completing a background check.

The Treasury would have the authority to require tax preparers to provide PTINs on returns (except people preparing a return under supervision of a preparer who signs the return), as well as rescind PTINs if a preparer is shown to be incompetent or disreputable, subject to notice and an opportunity for a proceeding.

The bill would also require a GAO study on the sharing of information between the Treasury Department and state authorities about PTINs issued to paid return preparers and preparer minimum standards. The GAO did an undercover investigation in 2014 into paid preparers. At 17 out of 19 randomly selected sites, the GAO report found tax preparers failed to complete a return accurately due to serious mistakes or willful negligence.

“Inept or crooked paid preparers regularly exploit taxpayers to pad their bottom line,” Wyden said in a statement. “States like Oregon have led in this area by requiring minimum standards for preparers, and it’s critical that we restore federal standards to protect all taxpayers.”

The senators pointed out that approximately 60 percent of taxpayers use paid preparers, and the IRS receives more than 10,000 complaints per year about them. The Taxpayer Protection and Preparer Proficiency Act would require preparers to demonstrate competency in preparing returns, claims for refund and associated documents. It also would require preparers to complete continuing education requirements.

“Our tax code is complicated and many families rely on outside help to figure it out. To protect taxpayers from incompetent or unscrupulous preparers, the IRS needs to ensure that preparers are qualified and held accountable,” Cardin stated. “I’m pleased to join in support of this legislation, which restores meaningful and much-needed standards and oversight in the paid preparer industry.”

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PTIN Tax preparation Finance, investment and tax-related legislation Ron Wyden IRS