IRS Getting Push-back on Return Preparer Regs

Most people are pleased with the IRS’ new tax return preparer regulations and are hopeful that they will help to purge the system of incompetent preparers.  But Elmer Kilian, an 80-year-old tax preparer from Eagle, WI, doesn’t want the government meddling in his business.  He and two other return preparers are filing a lawsuit seeking an injunction that bars the regulation from taking effect.  The lawsuit is being filed by the Institute of Justice in Arlington, Virginia.

The return preparer regulations include registration, testing, and continuing education elements — each element, of course, includes some costs that must be born by the preparer.  However, most of what I’m seeing in opposition to these regs has less to do with the costs than it does with pride and independence.  Some people just don’t want the IRS influencing their private businesses choices; they don’t like what they think is excessive government regulation.  Some folks have been preparing returns the old-fashioned way (maybe even with a quill pen) for decades without any egregious errors, and they would rather close up shop than change their ways.

Kilian and others also like to gripe about the injustice of exempting the CPA and tax attorney from testing and continuing education requirements.  I don’t know about CPAs but, trust me, if attorneys were subject to any more regulation they wouldn’t be able to get dressed in the morning without some regulatory authority telling them which tie they have to wear.

IRS Return Preparer Program

After yesterday’s comments from the Commish (that’s IRS Commissioner Douglas Shulman) at the AICPA fall meeting, there is reason for some tax preparers to be concerned. They have to be careful that their desire to offer taxpayers maximum tax relief and maximum refunds does not override their desire to perform their duties ethically.

Boiled down to its essence, the program will ensure a basic level of competency for return preparers while enabling us to focus on finding unscrupulous preparers.

~ Douglas Shulman, IRS Commissioner

The enforcement segment of the IRS Return Preparer Program will include:

  1. Letters to preparers who have been identified as “high risk,” making sure they are doing their due diligence.
  2. In-person visits with preparers who have been identified as “egregious.”
  3. Letters and in-person visits to return preparers who are not using the Earned Income Tax Credit correctly.
  4. Special crackdown on “ghost preparers” (those who don’t sign or identify themselves with their PTIN)
  5. Undercover shopping visits to preparers who are suspected of engaging in fraud.
  6. Civil and/or criminal prosecution where appropriate.
  7. Coordinated effort with the Office of Professional Responsibility and the Department of Justice.
While there are many undefined terms being thrown around, there appears to be a spectrum of poor conduct and discipline emerging. At one end is the return preparer who has exhibited a pattern of honest-appearing errors who will receive a letter from the IRS (this is something new). At the other end is the preparer who is suspected of something more “egregious” who very well could be tracked down and thrown in jail (this is not new).