Brick Wall Hit By IRS To Regulate All Return Preparers

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In February 2014, the Internal Revenue Service lost its appeal in the Loving decision. This means that the IRS needs to end its efforts to regulate about 350,000 tax return preparers who are not attorneys, CPAs or Enrolled Agents. So, no testing or continuing professional education requirement for this large group of preparers.

President Obama’s recent budget proposal supports a statutory change to let the Internal Revenue Service resume the program it rolled out in 2010 to regulate all return preparers (see FY2015 Greenbook, page 244). Other proposals exist as well.

What do you think? Should the Internal Revenue be allowed to resume its broader regulation program?

In accordance with Circular 230 Disclosure

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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  1. The Loving decision was the right one as a matter of law given the lack of statutory authority. More than ever, taxpayers need to know their return preparer is competent. Federal legislation is needed in the interest of consumer protection so that the IRS regulate return preparers.

  2. Trying to regulate that sector of the tax preparer industry is to swim against the tide. We pride ourselves of being a free-enterprise country with the liberty of choice. Let the general public make that decision for us, by selecting their own tax preparer without any coercion. Let the free market rules work.

  3. Connie B says:

    Hi Annette,

    I appreciate all the CPE Classes I have taken with you.

    This is a complex question. Regulation is generally better with public education.

    How about lobbying IRS to create a web page that lists the registered preparers (CPA, JD, EA, etc.) that are required to have continuing education based on their licenses? IRS would also need to create an educational program for the public to be informed of the way to determine determine if their preparer is required to meet IRS standards. This seems a simple solution to a complex problem.

  4. Hi Connie,

    Thanks for the observations. It is a challenging problem for a few reasons. I think a big one is that for so many years, the IRS only focused on attorneys, CPAs and EAs who are all already regulated. Growing complexity of the tax law continues to make it difficult for anyone to prepare returns with high levels of confidence. How can one effectively do this work without continuing education at least? I think some preparers think the software is the answer, but you still need to know a lot to use that tool.

    I agree that the IRS needs to educate the public more on what these designations mean. I also think the system needs a stronger “carrot” for all preparers to be on board. For example, there should be a penalty for any individual who pays someone to prepare that return and that person does not sign it or put their PTIN on the return. I know that sounds harsh, but that would be the most efficient way to go. And the IRS had said years ago that they would have a registry of people with PTINs. I wonder why that is taking so long. Oh well, we’ll see what the next move is by IRS or Congress.

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