Commissioner Doug Shulman testified the other day at the House Ways and Means session that the IRS is preparing a long overdue overhaul to make licensing for tax professionals. That has been something I have been screaming about for years to everybody. Mr. Shulman sat down and then told a House Ways and Means subcommittee today he is preparing a “comprehensive set of recommendations” that may include new regulations for preparers to help recover an estimated $290 billion in uncollected taxes. He later told reporters that may include a registration or licensing requirement. This isn’t a new idea and has been floating around for decades. The fact that the U.S. government really needs money tells you that they are finally getting off their tails to make the shortfall up by weeding out more crooked or at the very least incompetent tax pros.
Requiring paid tax preparers to register or become licensed would establish a national accreditation framework for the industry for the first time, with the goal of improving accuracy of tax filings and ending fraud that investigators say fleeces both taxpayers and the government.
“This is nothing less than a transformational shift,” Shulman said. That has been the case for California for years where the State of California has required through CTEC to be registered and to have had to pass around 60 plus hours of a basic tax class – you know, the ones that places like Block offer to allow you to become a tax professional.
The deal is though that with the current economy, you aren’t going to find Block hiring to many new people. It is bad business also to train your competition (something business people setting up shop up in some places overseas have learned the hard way). If you are taking a Block class they make you sign up stating that you aren’t going to work elsewhere, disclose their software training, etc.
Tax professionals fall all over the map when it comes to ethics despite efforts to get pros to take courses to stay on top of their game and be morally intact – at least when it comes to tax filings. That hasn’t always helped and it has been up to the Treasury to sometimes stop the fraud and they step up to take care of business. Case in point: the Treasury Department Inspector General for Tax Administration, a part of the Treasury which investigates fraudulent tax preparers, has helped prosecute several cases in recent years.
On Jan. 12, 2009, a Los Angeles preparer, Abdul Wahid, pleaded guilty to 10 charges including mail fraud, theft of government property, and aggravated identity theft after depositing checks clients wrote to pay tax bills into his own account and filing false returns on their behalf. He was sentenced to 132 months in prison and three years supervised release and fined $1,000.
Take note of the quote that was issued next: “There are no national standards that a tax-return preparer is required to satisfy before selling tax preparation services to the public,” the Treasury inspector general’s office reported last September. “Anyone, regardless of training, experience, skill or knowledge, is allowed to prepare federal income tax returns for a fee.”
That certainly shows on a lot of tax returns that I had to redo, amend or just look at in sheer shock and awe. There is a lot of bad advice out there and I think the step up of the introduction of testing and licensing will help weed out a lot of the bad apples in the income tax preparation business.
I will miss amending a lot of bad tax returns but there are generally a lot of those and no shortfall of people sadly who don’t know what they are doing with their income taxes. The fact that a lot of them are using the Internet or software just makes them prone to errors faster because they think they know what they are doing on complex returns and they find out after they get their audit letters that they weren’t even close.
There may regulations on do-it-yourself software and it all depends on how in-depth the IRS goes initially into the regulations. Something is suppose to be in place by December 2009 and I don’t know myself this point anything other than the information that I am presenting and what you can find out yourself if you search on the web.
It has been my experience that even decent experienced tax professionals (myself included in this batch) make mistakes once in awhile from the sheer volume of information that we have to keep track of and the tax law changes. It happens and we amend tax returns accordingly. It is even worse for the poorly trained tax pros and they even cause more damage if they are crooks. As usual, be careful of who helps you with your tax preparation and you get what you pay for when you depend on tax software from a box or the web. I am sorry but the software just can’t help you for complex tax returns and honestly, don’t you want a professional’s opinion at that point? Why take chances with something that might cost you more money and several weeks of lost sleep at night?
You can also take the time and check out one of my books, “Bad Tax Idea, Good Tax Idea” for some immediate suggestions to help your own situation if you have filed an extension and are wading through tons of spreadsheets and receipts.
I also can be consulted for a fee and if you are interested drop me a line and I can set something up with you for next year’s tax season or for specific questions that you might have. We are moving along to the point of the extensions ending and if you haven’t gotten started or continued on getting your tax return completed, please get on it. This is your June wake up call and time is marching on!
June 06 2009
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Kim Isaac Greenblatt
IRS to change tax pro regulations