With trillion-dollar deficits, cap-and-trade and nationalized health care on the horizon, the issues involving the possible registering and licensing of tax preparers seem trivial. Yet the ability to fund the deficits and pay for a nationalized health care system ultimately depends on the ability of the federal government to collect tax.

According to the Treasury, $285 billion of the tax gap is attributable to reporting noncompliance. Since more than 60 million tax returns are completed by third parties, it makes sense for the government to be concerned with the proliferation of unlicensed and unregulated return preparers.

That’s why the National Taxpayer Advocate has recommended for years the oversight of non-Circular 230-preparers (preparers who aren’t CPAs, attorneys, enrolled agents or enrolled actuaries). That’s why the Government Accountability Office and the Treasury Inspector General for Tax Administration have both issued reports calling for the registration of tax preparers. It’s also why legislation has been introduced in both houses of Congress over the past few years calling for preparer registration. And it’s why the Internal Revenue Service has determined to propose, by year’s end, a set of recommendations to help it leverage the tax return preparer community with the goals of increasing taxpayer compliance and ensuring “uniform and high” ethical standards of conduct for tax preparers.

It’s something that everyone agrees should be done. The question is how to do it.

The IRS recently concluded two of six scheduled public forums. The first panel heard recommendations from consumer groups including the AARP, the Consumer Federation of America, the Center on Budget and Policy Priorities, and the National Community Tax Coalition and Low Income Tax Clinics.

The second panel, moderated by Karen Hawkins, the director of the Office of Professional Responsibility, included representatives from the American Institute of CPAs, the American Bar Association, the National Association of Enrolled Agents, the National Society of Accountants, and the National Association of Tax Professionals.

All of the groups represented support judging the competency and ethics of tax preparers. The details, however, differ greatly.

Suggestions ranged across a wide variety of options, from simply enforcing existing preparer standards and extending them to include OPR oversight over unlicensed return preparers, to full licensing, testing, registration and continuing education standards.

My take is that all of the suggestions have merit and would likely have at least some positive impact. Many of the differences are due to the perceived impact on the membership of each professional group. As one observer put it, “They’re all trying to protect their own turf.”

Most people agree that something as important as tax preparation shouldn’t be open to just anyone. Among the potential problems, though, is that whatever the solution, it has to be enforceable. Simply put, if I have to get a license to do something, those that don’t get the license shouldn’t continue to do it.

And ultimately the system will succeed only if taxpayers are educated to pick the right tax preparers and recognize the bad ones.

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