AICPA SUPPORTS PREPARER REGISTRATION, WITH RESERVATIONS: While the American Institute of CPAs supports the concept of tax preparer regulation, it raised some public policy and drafting concerns about the registration proposal in S. 882 (H.R. 1528), known as the Tax Administration and Good Government Act, which passed the Senate in May.

In a letter to Congress, AICPA Tax Executive Committee chair Robert A. Zarzar noted that the registration proposal is a partial response to the high error rate associated with earned income tax credit claims and consumer protection concerns with refund anticipation loans. However, the letter stated, “direct approaches will better resolve these enforcement and consumer protection issues and result in more tangible increases in compliance levels.” The AICPA also urged Congress to enact legislation that would directly attack the fraud and abuse inherent in EITC claims, and that would restrict or prohibit refund anticipation loans.

The AICPA noted that a public relations campaign envisioned by the proposal to educate the public about a new classification of federal tax preparers would be to the detriment of other tax professionals such as CPAs, enrolled agents and attorneys. Moreover, it said, such a campaign “would likely confuse the public about who is a qualified tax professional, particularly with respect to the enrolled community and other licensed individuals under Circular 230 who have qualified for their profession based on a difficult competency examination.”

Instead, the AICPA recommended that Congress review the current electronic return originator application process, and how that process might overlap or duplicate a “limited” registration process for tax return preparers, to see if the current list can be used or expanded without the need to create a new list.

 

CPA’S APPEAL OF IRS DISBARMENT DENIED: The Treasury Department has denied the appeal of a San Jose CPA who was disbarred from practice before the Internal Revenue Service for giving bad advice to taxpayers.

Joseph R. Banister, a former IRS criminal investigation agent, had appealed a decision by Judge William B. Moran that he be disbarred from practice before the IRS. Judge Moran, acting on a complaint from the IRS Office of Professional Responsibility, found that Banister provided erroneous advice to taxpayers, including improperly advising them that returns weren’t required because Sections 861 through 865 of the Internal Revenue Code define “source of income” in a manner that excluded the income of U.S. citizens residing in the U.S. from U.S. tax. Banister also advised clients that they weren’t required to file because the 16th Amendment to the Constitution wasn’t properly ratified.

On appeal, David F.P. O’Connor affirmed the decision regarding erroneous advice to taxpayers, and agreed with Judge Moran that the erroneous advice charges warranted disbarment. In rejecting Banister’s claim that his advice to clients was protected speech, and that sanctions under Circular 230 shouldn’t restrain zealous advocacy on behalf of taxpayers, O’Connor said, “Zealous advocacy does not constitute license for the assertion of frivolous positions.” He agreed with the spirit of Judge Moran’s statement that “the 861 argument and the non-ratified 16th Amendment argument share a related lunacy in that, for differently concocted reasons, neither accomplishes the presumed goal of creating a federal income tax.”

 

TIGTA NOMINEE TO FOCUS ON MODERNIZATION AND COMPLIANCE: J. Russell George, President Bush’s nominee for Treasury inspector general for tax administration, told the Senate Finance Committee that some of the problems he focused on nearly a decade ago as staff director of the House Government Management Subcommittee still exist, and in some cases may even be worse.

During a nomination hearing in mid-July, George noted that, in 1995, he was asked to examine issues pertaining to the Internal Revenue Service, especially those identified by the General Accounting Office as being at high risk of waste and abuse. “Among the first issues we reviewed,” he said, were the following: “what was then referred to as the tax systems modernization initiative and is currently referred to as business systems modernization; what is now referred to as the ‘tax gap’ and other compliance issues; and the issue of erroneous and improper payments.”

“As you know, these very same issues ... still persist and in some cases have been exacerbated,” he said.

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