Tuesday, September 22, 2009

UPDATE - TAX PREPARER REGULATION

As you may recall, back in mid June IRS Commissioner Douglas Shulman put out the call to IRS “stakeholders” for comments on the topic of regulating, registering and licensing paid tax preparers. I answered the call with a detailed letter to the Commissioner outlining my thoughts on the issue at the time, which was expanded from my post “License and Registration, Please”.

Shortly thereafter I received a brief note acknowledging receipt of the letter and telling me that it was not being directed to the Commissioner but to some lacky in the Small Business section.

I heard no more regarding my initial letter to the Commissioner until a week ago this past Sunday, when I found the following letter waiting for me at my mail drop –

Dear Mr Flach:

I am writing in response to your letter dated June 22, 2009, addressed to the Commissioner of the Internal Revenue Service regarding oversight of tax preparers. Thank you for taking time to express your views on this very important topic.

As you are aware, the role of tax return preparers within the tax system has increasingly become more critical. Large percentages of taxpayers use a return preparer to prepare their tax returns. Consequently, the IRS is committed to strengthening our partnership with the return preparer community. Our goal is to improve the service taxpayers receive from all preparers by increasing our emphasis on preparer’s adherence to professional and ethical standards.

The IRS recognizes there are large numbers of tax preparers who are diligent and provide exceptional service to taxpayers. When tax professionals like you provide clients with accurate, complete and timely assistance, you ease the burden for them and the IRS. We comment and acknowledge your important role.

We are still in the initial phase of the return preparer review, currently gathering opinions and input from a broad range of external and internal stakeholders. This review is very broad and it includes potential options around licensing, registration, testing, enforcement, ethics and the expanded use of the PTIN. We recognize any changes we make will also impact taxpayers, and we want to ensure all taxpayer rights are adequately and consistently addressed.

Again, thank you for providing input on the topic of tax return preparers. Your feedback has also been provided to the team that is assessing all of the comments. We value all of our stakeholders’ comments and appreciate your continued support as we strive to maintain the fairest and most effective system of voluntary tax compliance in the world.

Sincerely,

Karen L Hawkins
Director, Office of Professional Responsibility


I had also written directly to the “team” with my updated and “evolved” thoughts on the regulation of tax preparers in response to a later call for comments. My letter was included in the post “Dear IRS”. I received a very brief letter of acknowledgement, which I quoted in “FYI – This Just In”.

Stacie Clifford Kitts quoted an IRS notice in her post “Unenrolled Preparers - IRS Wants Your Comments -Tax Payer Standards” which announced that “the third and final public forum to gather input on tax return preparer standards will be held on Wednesday, Sept. 30, in Chicago. It will feature two panels of representatives from the software and unenrolled preparer industries and be moderated by IRS Commissioner Doug Shulman.”

The notice goes on to say that - “The forum will convene at 9 a.m. CT in the J.R. Thompson Center at 100 W. Randolph St., Chicago, IL 60601, in the lower level auditorium. Anyone interested in attending should confirm attendance by sending an e-mail message to CL.NPL.Communications@irs.gov.”

The “unenrolled preparer industries” I would expect refers to the likes of Henry and Richard, Jackson Hewitt, and Liberty Tax Service.

I have reported on the “testimony” given at the previous two public forums in several posts here at TWTP, and will also do so for this final forum in the beginning of October.

2 comments:

Mary O'Keeffe said...

Robert, are you aware that your letter, along with many other letters from interested individuals--most of them paid preparers, are posted on the IRS website?

http://www.irs.gov/taxpros/article/0,,id=212569,00.html

If you haven't seen this files linked on that page, I think you'll find it most interesting. There are quite a few from long-time unenrolled preparers who agree with you about grandfathering.

Some of them mention that they are in their 70s and "too old" to deal with a test at their age.

Obviously, you have a large and satisfied client base and your blog posts suggest a very strong familiarity with current tax law.

This may not be true of some of the other long-time unenrolled preparers. Some may have excellent past track records, but age and poor health may have taken their toll.

If the IRS requires a taxpayer to take an "examination" (which is IRS-speak for an audit), the taxpayer has no choice about it.

That being the case, I don't believe that people who want to be tax professionals should have any choice about taking IRS-mandated examinations either.

One alternative to a conventional exam that you and the other enrolled preparers dislike would be for the IRS to allow grandfathering with the proviso that, all other things being equal, returns prepared by grandfathered preparers would be selected for audit with a higher probability than those prepared by preparers who had taken a recent test.

If taxpayers knew this to be the case, they would likely demand that their preparers take the test.

Robert D Flach said...

MOK-

Thanks very much for "turning me on" to the IRS webpage that displays the comments received. I was not aware of this.

Once I have finished all my 2008 GDEs (by end of September) I will take the time to read through the other submitted comments. It seems that a lot of tax pros responded to the call for comments.

If I must take a test - so be it. However, I still do not think the IRS wants to, or can, properly test over 1 Million preparers. And I will continue to push for some kind of grandfathering.

At this point anything that happens will not take affect until the filing of 2010 returns in 2011at the earliest, as it is too late in the year to do anything now.

Thanks for keeping on top of the issue and, again, for telling me about the public posting of my comments.

TWTP