Return preparer program goes too far, too fast
By E. Lynn Nichols, CPA
While I support efforts by Congress and the IRS to reign in abuses by unlicensed, unregulated tax return preparers, I believe the current program is suffering from bureaucratic overreaching.
When first announced on Jan. 4, 2010, after six months of study by IRS and Treasury officials, the program was hailed as necessary to clean up the tax preparer business. The program was to have three parts: registration, education, and enforcement. CPAs, attorneys, and enrolled agents were to be exempt from the registration and education requirements. As often happens with government programs, this one now appears to have outgrown its mission.
Publication of proposed regulations expanding the reach of Treasury Circular 230 to “all paid return preparers,” including, under the new system, any individual who prepares all or substantially all of a return for compensation – even if it’s only one return – has energized opposition to the IRS’s preparer registration program.
Some of us had experience last year with the 10,000 IRS letters to CPAs and other preparers that stated we were responsible for determining the correctness of a client’s reported income and business expenses. That was an unsupported overstatement for which the IRS later apologized, but it’s an indication of where they are trying to take the paid preparer registration program. CPAs need to resist any such attempts to make us “audit” a client’s tax information.
The IRS has contracted with an outside consulting firm to run the program because the agency was already overburdened with monitoring various tax credits and multiple tax law changes. The consultants will get $14.25 of the $64.25 registration fee for every individual who prepares returns. That definition includes individuals working in a CPA’s office who prepare, but do not sign, tax returns.
Many CPAs believe the unholy combination of a perpetually troubled federal agency and a consulting firm is unlikely to operate smoothly or to achieve its intended goal. We should demand that the IRS focus on unregulated preparers, as intended, and let CPA firms operate without another layer of registration and compliance imposed on staff accountants.
You can e-mail comments to the IRS at *firstname.lastname@example.org. (The asterisk is important!)
Perhaps opposition from CPAs, who generally run ethical tax preparation businesses, will encourage the IRS to reconsider the proposed scope of this important compliance initiative.