Tuesday, October 6, 2009

THE KIPLINGER CRYSTAL BALL AND TAX PRO REGULATION

Many years ago, in the early days of my career, I subscribed to THE KIPLINGER TAX LETTER (“Circulated Biweekly To Business Clients Since 1925”) for a year or two. At the time I did not feel that it was worth the cost.

Actually I have subscribed for a year or two to many tax newsletters over the years, but the only subscription that I continue to renew each year, at $39.00 per year, is BOTTOM LINE WEALTH (the newsletter formerly known as TAX HOTLINE). I have often touted and quoted from TH and BLW here at TWTP.

Anyway, I recently once again subscribed to TKTL, due to a great deal for “professionals”. However, I do not think I will renew. Considering the wealth of tax information and insight that is available free of charge on the internet the KIPLINGER letter is, at most, a luxury and certainly not a necessity.

The reason I bring this up is because the October 2nd issue briefly discussed the IRS’ possible plans for regulating tax preparers under the category PREPARERS.

The newsletter tells “unlicensed preparers” to take note: “Regulation by the feds is coming soon”. It is the opinion of the Kiplinger Washington Editors that - “IRS will propose a regime for regulating preparers by the end of the year. Congress will likely OK it in 2010, so it could be in place for returns filed in 2011.”

Commissioner Shulman has indeed promised that “by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers”.

There have been a few tax pro regulation bills introduced in Congress over the past several years, but these bills have always been lost in the shuffle as our elected officials had more important business with which to deal. Now, with the IRS firmly behind some kind of registration and regulation regime, there is no doubt that Congress will respond to the Commissioner’s recommendations with hearings and a bill.
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Considering that, in my opinion, Congress will probably be totally rewriting, or further complicating, the Tax Code in 2010, it would be a good time to add tax preparer regulation to the mix.

KIPLINGER feels that – “The cornerstone of the new system will be a registration requirement. Preparers would pay an initial sign-up fee, then renew their registration periodically.” They also expect that budget constraints will force the IRS to exempt lawyers, CPAs and Enrolled Agents from the new registration regime.

Odds are low that the Service will impose an ‘up-front’ entrance exam requiring preparers to pass a test before they’re allowed to register with the IRS.

More likely: A testing requirement that is phased in over several years, plus required continuing education. . .both probably just for unregulated preparers
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It is expected that volunteer preparers would be exempt from mandatory testing and registration.

I firmly believe that the main goal of the IRS in starting its “Tax Return Preparer Review” was to end up with a national registration of tax preparers - so that there would be a single registration number assigned to each preparer and the IRS could track them more easily.

I doubt very much that the IRS ever wanted to become involved in the agita and expense of testing over 1 Million tax preparers. Actually I had been told by a former IRS insider that this is why the previously introduced bills died a quiet death – because they all included at least initial testing for all, and the IRS knew that properly implementing such a program would be virtually impossible. At the time they were having enough trouble with the Special Enrollment Exam for a couple of thousand EA candidates each year (this was before it was “outsourced”). However, since they opened up the can of worms they may be stuck with it.

So that is what KIPLINGER sees in the very near future for tax professionals in its crystal ball.

BTW, the issue also noted that the “IRS is delaying the start of random payroll tax exams by three months. Notices will start going out next Feb., not in Nov., as originally planned.” I believe that I mentioned this upcoming program, which will audit some 6000 businesses over a three-year period, somewhere in an earlier post.

TTFN

2 comments:

mok said...

I'm not sure why the Kiplinger letter "expects" that volunteer preparers would be "exempt" from mandatory registration and testing.

VITA/TCE/AARP volunteers are already required to register with the IRS and we are all required test annually. I seriously doubt there will be any rollback of that requirement, which is already on us.

Robert D Flach said...

MOK-

I expect that what the KWE meant was that volunteer preparers would not need to be registered and tested under the NEW regime.

I am sure that there would be no changes made to any current requirements.

TWTP