Need For Greater Tax Literacy And Regulation of Preparers

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I was shocked by the March 13, 2015 IRS release warning individuals to chose their tax professional carefully. The IRS found that some “unscrupulous preparers” instructed their clients to make individual shared responsibility payment directly to the preparer! That is stealing!

I fault the clients, preparers and the complex system.

The IRS has tried to regulate all return preparers but been held up by a need for a statute change that Congress will have to address (see quick summary from IRS on this). Of course, truly unscrupulous people will still find a way around the law.

So, more is needed to educate individuals about the tax system so they better understand what is reasonable and what is not reasonable. This should be part of a high school civics class. Also, individuals should be penalized if they pay someone to preparer their return and that person does not sign their return and list their PTIN. I’ve mentioned this before and some people thought I was being too harsh. But, the IRS can’t find all scammers and people are responsible for the return they file. Knowing they will get penalized by going to an unscrupulous preparer (one who will take the client’s money but not sign the return), perhaps we’d see fewer unscrupulous preparers.

And, some of this issue relates to the individual shared responsibility payment. It is owed for any month, starting in 2014, that an individual does not have health insurance and doesn’t meet an exemption. I think it is reasonable that many people would not think that is a tax return item (but not sure why they think then that the payment goes directly to their return preparer).

What do you think?

Original Post By:  Annette Nellen

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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