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TAX PREPARERS: IRS launches oversight of tax preparation industry

Letter by David Tucker, Seattle on Dec. 9, 2010 at 11:46 am with 68 Comments »
December 9, 2010 2:33 pm

The Internal Revenue Service recently launched an unprecedented effort to provide some oversight over the tax preparation industry, including Washington’s 19,000 tax preparers.

Most tax preparers are dedicated to quality tax return preparation and are committed to quality service for their clients. But the actions of a few preparers cause lot of problems – for their clients, for preparers who follow the rules and for the IRS.

Here’s what we’re doing:

• All paid tax return preparers must register with the IRS and obtain a new or renewed Preparer Tax Identification Number (PTIN.) prior to preparing a return in 2011. There is a $64.25 fee.

• Starting in mid-2011, the IRS plans to require that certain paid tax preparers pass a competency test. CPAs, attorneys and enrolled agents will be exempt from this exam because their professional requirements also include testing.

• The IRS also plans to require certain paid tax preparers to take 15 hours of continuing education courses annually. The same exceptions apply.

• And lastly, the IRS will create a new designation for those paid tax preparers who obtain a PTIN, pass the test and take their education courses: registered tax return preparer. This future credential will signal to taxpayers a certain level of competency and qualification.

Sixty percent of taxpayers use a tax preparer. They deserve some peace of mind that the person they are paying to do their taxes has some degree of proficiency and high ethical standards.

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Leave a comment Comments → 68
  1. sumner402 says:

    Sounds like good solid policy.

  2. Had no idea there was a tax preparer crisis.

    By forcing them to relicense the state will rake in $1,220,750 . This could be the states new cash cow.
    Imagine if the state did the same thing with teachers, plumbers, electricians, etc.

  3. beerBoy says:

    A lot of chain tax preparers prepare their preparers very sparsely. It is a good idea that they be required to be licensed.

  4. I can tell you that the state’s exam for realtors is about as applicable to selling real estate as Nancy Pelosi is to hunting caribou. Given the fact that the IRS doesn’t understand the code, I wouldn’t expect a great improvement in tax preparers. But the state will dang sure collect it’s $64.25 and the preparers will pass it along to you. The state gets more money, pretends it is providing a service, and you get the bill. Don’t you love it when that happens?

  5. aislander says:

    This is the IRS requiring a license for tax preparers. One more example of the tentacles of the central government tightening around every aspect of life. We should resist this if only on general principles…

  6. A321196 says:

    aislander:

    Complainers of any government oversight do not have a clue as to the rampant tax cheating and poor preparation by income tax return preparers who are not cpa’s, attorneys or enrolled agents. All you have to do is to go to the IRS Criminal Investigation website for the latest return preparer’s who have been convicted of preparing false returns. This does not include a good number of income tax return preparer’s who do not intentionally preparer bad returns, but, just do not know the law, rules and regulations. Most states that levy income tax require a written competency test, such as Oregon and California. In Washington State all a person has to do is pay an insignificant fee for a B&O Tax license, buy a card table and a box of crayons. Then when the suspect poorly prepared return gets audited, the individual taxpayer is on the hook for the tax, penalties and interest. Of course, when the taxpayer gets back an unusually large income tax refund, he or she feels great (until the other shoe drops).

  7. sumner402 says:

    If aislander is against, that means it’s even better than I thought.

  8. Publico says:

    “sumner402 says:
    December 9, 2010 at 4:51 pm
    If aislander is against, that means it’s even better than I thought.”
    Amen and glory be!!

  9. ItalianSpring says:

    I use Turbo Tax. Just like tax cheat Timmy Geithner. Here’s an idea. No income tax. Ever.

  10. nwcolorist says:

    there may be some advantages to licensing tax preparers, but this will undoubtedly be way too invasive .This will likely hinder, rather than help the industry Also, we’re talking about establishing a whole new level of federal bureaucracy.

    The part that intrigued me was the mandated 15 hours of ongoing “education”.
    What a bonus for the colleges. And you can be confident that it will have little if any effect on increased performance. After all, how beneficial are the teacher’s ongoing education requirements for improving performance?

    It’s one more link in the shackles of American serfdom.

  11. UnbiasedReporter says:

    Just use TurboTax and be done with it. And if you make an error just claim a Geithner.

  12. rr98411 says:

    “Complainers of any government oversight do not have a clue as to the rampant tax cheating and poor preparation by income tax return preparers who are not cpa’s, attorneys or enrolled agents.”

    I’ll never understand this logic… do you ever think that poor preparation may be because the tax code is more complicated than it needs to be. Take a look at three common forms 1040, schedule A, schedule C for a business, got kids – 2441, education expenses – ####, oh wait worksheets…. In each instruction booklet, as part of the Paperwork Reduction Act, an estimate of the time to complete the form is made… some are upwards of 20-24 hrs.

    I have a standing bet that I am willing to go all it… take your tax return (1040’s only) and have 5 differant preparers (HR Block, CPA, Registered Agent, etc…) with the exact same info for each. If all 5 come up with the exact same number on all five… no, I’ll double down… If all five come in with $100.00 from lowest to highest, I will kiss the right cheek (you choose north or south) of all five preparers on the steps of UW-Tacoma.

    It’s plugging in numbers, adding and subtracting right.

  13. “Complainers of any government oversight”

    False dichotomy much? Yep.

  14. karlveek says:

    TurboTax Deluxe is the only way to go.

  15. aislander says:

    Consumption tax (Fair Tax): Problem solved, $350 billion saved.

  16. aislander says:

    Publico writes: “Amen and glory be!!”

    Thank you for validating my belief that liberalism (or worship of government–same thing) is a religion…

  17. 30 years ago I went to Block and realized immediately that the preparer had no clue how to deal with my taxes (I worked for many years as an independent contractor). Did the taxes by myself for over 20 years. After opening my business in Tacoma I got a tax accountant who actually got a degree in a related field. Never going back to doing the taxes by myself.

  18. blakeshouse says:

    Is there anyhthing that the IRS does that isn’t too invasive? The hunta in charge can’t get his destruction of the country done by legislation so they are going the regulation route, hoping noone will notice. The IRS, FCC FAA and all other dept have but 2 yrs to try and imbed as much of their nanny state socialism as they can to try and make it next impossible to remove. More dependency does nothing more than reduce freedom

  19. sumner402 says:

    So the count is now 3 ultra rightwing whiners against this, and those are for the thinking Americans ringing endorsements for the new oversight.

  20. chris3dog says:

    Could this oversight of tax preparers just be a ruse to weed out the “predatory lenders,” masquerading as tax preparers?
    Has our local, Bob’s Tax Service, morphed into Bob’s Loansharking, LLC?

  21. commoncents says:

    ding ding ding ding – chris3dog has it exactly right. Why do you think you now have to list your child’s ssn on your return even during the first year after birth? I worked for one of those tax prep outfits — in Renton, Washington — just after college graduation about 2 decades ago….I’ll never forget one of the returns that I was asked to review (my degree is in accounting with an emphasis on tax). The single father’s W-2 showed he earned just enough to maximize the newly implemented earned income credit. Which was fortunate for him because he had twin children who were born that very same year. The kids names were T. Juana I and T. Juana II. We were allowed to kick them back to the storefronts (a payday loan outfit owned by the same entity that was doing the tax prep) to get more detail but we needed mgmt approval so I took the return to the owner and his response was to file it and let the IRS deal with it. Of course the father was getting his return filed electronically but was paid up front by our firm – for a small fee. Now, that return could very well have been real but it was not that much different than hundreds of other returns filed by myself and my co-workers. Sure were a lot of kids born that year.

  22. Sumner402 – May I ask how this is a “good solid policy”.

    From my perspective we have a tax policy that is more complicated than it needs to be for us normal humans. Fine we’ll get rid of the rift raft but don’t delude yourself into believing that your tax return is “correct.”

    Without the bad attempt at humour, take your tax return (1040, sch-A and better yet a sch-C… the more forms the better) to 5 different CPA’s and I submit you will get 5 significantly differant bottom line numbers given the same inputs. No matter how “competent” they are because of an IRS test it is still a matter of preparer judgement whether something is deductable or not. Again take a look at the number of forms, worksheets, instruction booklets, receipt requirements, etc… and given the number of moving parts their is alot of points where a small “error” (not the best word) can occur. Hence, you either leave money in the Treasury coffers or you take too much back.

    Like a bunch of crack addicts, we need to get off the illusion of deductions and send the treasury only the amount of tax that is due. The current system requires us to send them more that is required and through that illusion of deductions, we get back money that is ours to begin with. Why send them more than they are entitled to and ask (beg) for some of it back.

    The more simplistic the system, the more it is “correct”.

    PS – at the top of my page is an advertisment for tax relief… ironic.

  23. ratujack says:

    The mess is the IRS. There’s as many as 3 generations at management levels at the IRS. Son after son after son. Incest with-in the IRS management. We need to change the IRS and go with a different system. National sales tax. Single digit percentage with everyone paying………….some thing new and simple. The IRS was created because our elected officials needed more funds to spend SPEND AND TAX. …..The IRS costs billions to service its-self. Do away with the IRS as it is today.

  24. redneckbuck says:

    If they would have done this years ago, the government could have balanced the budget on the money gained from the Kennedy fortune.

  25. chris3dog says:

    Do away with the IRS?
    If they would have done this years ago, the government could have balanced the budget on the money gained from the Kennedy fortune.

    ratujack and redneck suggested these two gems. Wesley Snipes had even a better idea, …… but a funny thing happened on the way to Pennsylvania.

  26. redneckbuck says:

    Flat tax for those above 75k, done

  27. redneckbuck says:

    Do away with the IRS!!!!!!! We collect more money by installing a flat tax for those above 75k and doing away with all the games. Right now the whole tax collection business is just a joke! Repubs and Dems alike can agree, waiste in gubment is a terrible thing. We can give 40 billion to the IRS or to the poor each year.

  28. redneckbuck says:

    IRS or money for the poor
    IRS or Healthcare for all
    IRS or New schools
    IRS or unemployment benefits
    IRS or………….

  29. IRS should not be the sole target. Tax law is written in Congress, the IRS only administers the tax system.

    Want change you can believe in… lobby your congressman, specifically the members of the Ways and Means Committe… http://waysandmeans.house.gov/

    They are the ones that can actually affect the tax system in the US.

  30. Roncella says:

    Just another example of Big Government moving to get a firm grasp on another new source of income. Note how lawyers are excluded from the new requirements.

    Sumner and the other lib/progressives are all thrilled with this new requirement by the IRS. There is never too much Government/IRS oversight for the lib/progressives.

    At few of President Obama’s cabinet choices were delinquent in paying their taxes, and they all were given a pass, no fines or late payments.

  31. sumner402 says:

    It’s getting better all the time.
    The more the lunatic fringe right is against this the better policy it is.
    they are on the wrong side of every issue so you know this is good.

  32. redneckbuck says:

    Sumner let’s hear your ideas. What should the highest tax bracket and % be?

  33. Sumner402 says:
    It’s getting …
    … you know this is good.

    Can you really explain to me that the IRS is administering the tax code at its most efficient? That the tax code itself is effective at generating revenue at the lowest administrative cost possible. That this specific requirement contrubutes to more effective admininstration of the tax code? (I will submit that this will weed out the rift raft but not necessarily the dumba$$es)

    This is nothing more than an unimaginative government whose sole solution to literally every problem is more regulation and in turn more money from you.

    You got anything… just asking.

  34. redneckbuck says:

    Sumner??????? crickets

  35. For decades I’ve heard people wail against the IRS! Against taxes! Against government! What do you all suggest? Somehow you all think the IRS is going out of business. Whatever system Congress puts in place will be administered by the government. A value added tax? A flat tax? A national sales tax?

    Let’s see! For Christmas, you want to get your beloved sweetie that $5,000 mountain bike. A national sales tax or value added tax of 10% (whatever amount you want to set) is a tax of $500. Who will see if that person takes the tax you paid and sent it to the government? Oh, scouts honor! Cross my figures and pray? Yep, the IRS ain’t going anywhere. Go check the amount of unpaid/delinquent social security and medicare taxes that have been withheld by your employers and not forwarded to the government. That’s your money that was withheld from your paychecks. Just hope the money gets to the government. Yeah, yeah, yeah, Complain, complain, complain. Do some analysis and come up with a better plan. Meanwhile, email your elected representatives with your great suggestions.

  36. Why single out Wesley? What about Charlie Wrangle? (or a host of Obama appointees) You’d think a true believer of taking other peoples money would have had enough cents ;) to know the very tax laws he was violating.

  37. sumner402 says:

    Yes, better and better, the more the lunatics hate it the better it is.

  38. Roncella says:

    Sumner who do you think will pay for this new charge. The tax preparers will pass this added expense on to the average folks who file in to get their taxes done.

    Sumner as a true leftest liberal you should be angry about putting another charge in place that the average working people will have to pay.

  39. sumner402 says:

    roncella, it’s 62 bucks a year.
    Divide that up among all the customers and even you can afford to pay the outrageous bill!
    If you can’t I’ll send you the half cent it might cost you.

    It’s good policy and you all know it, your knee jerk whining aside.

  40. Consumption tax (new American Stamp Tax) = $350 billion short fall = bankrupt America.

    Flat tax – widely supported by the rich so they get to keep more money to not invest in America.

    IRS officials and employees cannot be held accountable for given false, bad, or misleading advice.

    But Private Citizens who do their own taxes or have them done by non-IRS tax preparers can and are held accountable for any and all errors.

  41. aislander says:

    Hey xring: Flat tax + $350 billion in cuts = balanced budget*. Who says the government’s priorities are sacred?

    *If your numbers are correct, but I don’t trust them because, well, you’re a lefty…

  42. xring – with your last statement you just made a good case for simplfying the tax code so that 1-we the people wont need to rely on “professionals” subject to error for our reporting and 2-the complexity is reduced so that the likelihood of error is also reduced.

  43. But Ai and rr98411… that’s how lefties “create” jobs (jobs is a 3 letter word according to Joe -0 charitable giver- Biden)

  44. aislander says:

    xring: I was rather sleepy last night when I made my last post, and missed an obvious conclusion: an only $350 billion shortfall would be a HUGE IMPROVEMENT over where we are today…but I STILL want the cuts…

  45. aislander says:

    Furthermore, xring, the cost of complying with the current tax system is about $350 BILLION DOLLARS! Now we’d BOTH be happy with a flat tax, right?

  46. Islander your original post was “Consumption tax (Fair Tax): Problem solved, $350 billion saved.”

    rr98411 – simplifying the tax codes – Sign me up! We can start with closing all loop holes, removing about 99% of the exemptions, and writing what remains in plain English so you don’t need special training to understand the code.

    We can also change the way tax is figured on a progressive manner. EX: say the rates are 10% up to $100,000, then 12% up to $200,000, and 14% up to $300,000. So for someone making $250,000 the tax would be $1000 for the first $100,000; $1200 for the second $100,000; and $700 for the final $50,000 or $2900; rather than $3200 for the whole $250,000.

    Of course we’ll get some pushback from the tax lawyers, accountants, and IRS agents.

    Islander – Yes, we need to cut spending a lot (how and where we can discuss later) but we also need to stabilize federal income, and negotiate with our creditors. Just like people and corporations do to avoid going bankrupt.

  47. aislander says:

    I meant “Fair Tax,” xring, but a flat tax would be a vast improvement over the status quo, as well…

  48. From the guy who coined the Invisible Hand

    “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
    Adam Smith, The Wealth of Nations

  49. BeerBoy – you are correct with the quote, it is not unreasonable.

    As I posted before, the top 5% pay about @68% of all federal income taxes. The lower 50% pay @ 3% of all federal income.

  50. xring – I am encouraged by the President’s call for a tax code overhaul this coming year. No delusions that was a 98% political appetizer statement but he is game for an overhaul and we see how that plays out.

    I see advantages and disadvantages to both the FairTax and FlatTax. The advocates have a pure view of each making a good case for each. I would be curious to see what the proposal out of DC would be after the Congress gets their partisan hands on it.

    Either way the current systems does not work. I agree with aislander about the excessive cost of administration. As a percentage, the IRS is spending about .22 cents of every dollar recieved in administative cost alone. That number has been rising over the last three decades.

  51. sumner402 says:

    I am encouraged by the President’s call for a tax code overhaul this coming year.

    I am too but we all know with the GOP majority in the House, whatever they come up with will be not help the middle class but will in fact only help the top 5%.
    That is if the GOP allows anything to come to a vote at all, which is more likely the case.

  52. “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

    Their not?

  53. sumner…

    If you extend or make permenant the exisitng tax rates then they do help the middle and lower class too. ALL tax rates go up if they are not at least extended affecting ALL federal tax paying citizens. For the lower rate – 10 disappears and it will rise 50% from 10-15% (what a prick George Bush was think about the lower and middle class.). Please enough with the wealthy stuff. It not the governements money, it’s theirs, they earned it. If the government will control its spending and/or spread the tax base, we will not be talking about deficits.

    The top 5% account for @60% of the fedral tax revenues, the bottom 50% pay @3% of the federal income tax, what more do you want?

    By the way, with the minority position, it will be the Dems turn to block votes this time around…

  54. Roncella says:

    98411, I noticed you got no response from sumner yet. I doubt you will.

    Your right on in your comments about allowing the Bush tax break for the top 2% to continue and why it makes sense.

  55. Rr98, I agree with you comments. I just hope ‘a tax code overhaul’ is not real speak for letting the tax lawyers and accountants re-write the code protect their jobs, to give more benefits to big business and other special interest groups, and to screw the working and middle classes.

  56. xring – the prez said tax code overhaul is on the agenda for next year. Annoy the president (or at his committe)

    Annoy Dave Camp (R) the next two years. He is the Chairman elect.

    If you support the agenda, annoy the local Tea Party.

    Annoy the hell out of Norm Dicks (D) to support said legislation… or not.

    Then and only then do we have a chance of any meaningful changes to the tax code.

  57. Context who

    There were several posts calling for a flat (“fair”) tax for all levels of income. I cited Adam Smith in response.

    Context.

  58. sumner402 says:

    If you extend or make permenant the exisitng tax rates then they do help the middle and lower class too.

    If that were true than they would already be helping the middle class, which is shrinking at an alarming rate.

    The top 5% account for @60% of the fedral tax revenues, the bottom 50% pay @3% of the federal income tax,

    So what? fox propaganda must be beating this drum quite a bit as all you fox bots are parroting it like it means something.
    It means nothing and has little to no relevance.

    Please enough with the wealthy stuff. It not the governements money, it’s theirs, they earned it.

    Aaah yes, the ‘taxes are stealing’ meme, even more worthless than the other talking points.

    I had hopes that you might be a somewhat rational rightie, but my hopes have been dashed.

  59. sumner402 says:

    I noticed you got no response from sumner yet. I doubt you will.

    Roncellla the day you answer a question put directly to you will be the day we all go ice skating in hell.

  60. The top 5% account for @60% of the fedral tax revenues, the bottom 50% pay @3% of the federal income tax,

    This demonstrates the amazing disparity in wealth, not – as some want to interpret it – the truthiness of the idea that the poor aren’t paying their fair share.

  61. sumner –

    Tax policy as well as other variables contribute to a shrinking middle class. My point is that if you extend or make permanent the current tax rates, lower and middle class benefit by not sending more money to DC. It’s not the current tax rate that is affecting the middle class.

    The relevance is that the evil rich pay more that their fair share of the federal income tax. @47% pay of the income tax paying population no income tax at all. So the evil rich are paying not only their fair share but also helping to pay the fair share of the lower income classes in society. Isn’t that nice of them. I think that relevant.

    “Taxes are stealing” nope, not sure where the quote came from, not me… but since you bring this concept up… no, taxes are not stealing, though the government is not entitled to more than is required by law.

    I am sadden that you no longer believe I am part of the somewhat rational right. I look forward to you ad hominem attacks. Have a nice morning.

  62. “This demonstrates the amazing disparity in wealth, not – as some want to interpret it – the truthiness of the idea that the poor aren’t paying their fair share.”

    The working poor are paying their fair share, I agree with you there. I would also submit that the wealth disparity is more a result of career choices, taking advantage of opportunities as well as spending habits relative to income.

    My point with the top 5% statment is that the “rich” pay more that their fair share of taxes.

  63. When deciding who is paying “their fair share” and who may not be paying their fair share, one point seems to be overlooked. We are financially responsible for whatever costs we incur (we being the United States of America).

    I cannot tell my creditors that I’ve paid my fair share if I haven’t paid the amount that I owe. I cannot tell the utility company that I have paid my fair share if the utility bill is not fully paid. The money has to come from somewhere. If my paycheck isn’t enough than I have to dip into my savings. If my savings are exhausted, then what?

    On what basis does one get to claim that they have paid their fair share?

    If the top 5% pay more than their fair share of taxes, from where does the rest of what it takes to run this country, come?

    None of us have paid enough until the bill is satisfied.

  64. sumner402 says:

    Tax policy as well as other variables contribute to a shrinking middle class.

    At least you can see that much!
    Now do you see how that trickled down tax policy is in fact reducing the middle class wealth and transferring (redistributing) UP to the top 2% where it NEVER comes back? It’s been going on for the last 30 years, DC isn’t getting the money, the top 2% are!
    It the disparity figure that should be alarming you!

    These tax cuts you love so much are NOT helping the lower and the middle class and they never will! They are benefiting the upper income FAR more than anyone else, if what you are claiming is true, again I have to ask why is the middle class shrinking and in such bad shape?
    These wonderful rates have been in place for 10 years, how long are you going to give them before you admit they aren’t doing what your party has told you they will?

  65. sumner402 says:

    The relevance is that the evil rich pay more that their fair share of the federal income tax.

    No they do not!
    They get a far larger share of the benefits and services that our Govt. offers and they have 90% of the money and are getting more of it all the time, aren’t you tired of giving it to them and getting nothing in return?

  66. Roncella says:

    sumner, Try Ice Skating in Minn. especially in the next few days you’ll have better luck then in hell.

  67. rr98411 – since the wealth disparity has grown exponentially in the past 30 years are you saying that the past 3 decades are marked by more people making bad career choices?

  68. Rr98 – The top 5% make 80% of the taxable income and pay 60% of the tax. It does not compute that they are paying their fair share. And the canard that the tax breaks for the wealthy helps create jobs is a myth.

    “wealth disparity is more a result of career choices” And shipping American jobs overseas has nothing to do with unemployment and unemployment has nothing to do with the wealth disparity.

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