Monday, October 11, 2010


Joe Kristan’s preliminary response to my last post on the subject of tax preparer regulation, which tells us that he must, quite understandably, wait until after the October 15th GDE filing deadline to properly “return volley”, refers us in the mean time to another critic of regulation.

In “Institute for Justice Speaks Out On IRS Power Grab” at THE ROTH AND COMPANY TAX UPDATE BLOG he refers to statements by Dan Alban, a staff attorney at the Institute for Justice in Arlington, Virginia who has filed comments with the IRS on behalf of the Institute opposing the proposed licensing requirements.

In “The IRS and the Latest Licensing Outrage” at DAILY CALLER Alban says-

This scheme will disproportionately hurt small tax-return preparation businesses and independent preparers, many of whom may be forced out of business.”

Why do those opposed to tax pro registration continue to say the costs of the new regime will be prohibitive and hurt small tax return preparation businesses and independent preparers, forcing many out of business? And that the regime will increase the cost of tax return preparation services? I wish they would explain.

You don’t get any smaller or more independent than me and my practice. As I have said over and over again the costs are minimal – and hardly worth passing along to clients. $64.25 per year ain’t going to break me – nor will a nominal one-time $100-$200 for the test.
{As an aside, the only thing that would possibly force me out of business is being required to submit all my returns electronically using the current system of expensive and flawed tax preparation software.}
Speaking from my specific individual situation – I would, to be honest, not be upset if there were no regulation of tax preparers. I have been operating profitably and happily for 39 years without regulation, and would just assume continue that way for my last 11 years. If regulation had not been proposed by the IRS I certainly would not be campaigning for its institution. But if it is to become a fact of business life I can see how it does have merit and provide benefits to preparers, taxpayers, and the IRS.

Now that it is in place, my only real complaints are about having to take a test after 39 years of practice without incident to show that I know what I am doing, and having to sit through 2 hours of “ethics” each year. Having to take the initial competency test is a PITA, and 2 hours of redundant ethics “education” annually is a waste of time – but it is nothing I cannot handle. Many CPE offerings had been including 2 hours of ethics for a few years now – so I have already been wasting my money.

Truth be told, regulation does not affect my practice one way or another – other than as a minor inconvenience. I am not looking to increase or expand my 1040 preparation business – on the contrary I am looking to “thin the herd”. And if I did need more clients I could easily get them by telling my existing ones I was accepting new work. I already attend more than 15 hours per year in CPE classes in federal taxation. And I am honest and ethical.

Joe’s post gives us a taste of what he will cover in his next volley. He promises to address “the ‘do you oppose regulation for doctors, lawyers and engineers, too?’ red herring”. Red herring? An interesting comment. I look forward to his post, but have plenty to do while I am waiting.



Peter Reilly said...

Interesting discussion. I noticed one thing in his discussion

- The regulatory capture problem and the artificial barriers to entry placed on tax services by incumbents, with the effect of increasing their incomes by keeping newcomers out.

He seems to imply that would be a bad thing. LOL. Just kidding.

Dan Meyer said...

To follow up on Joe (and Riles), economists generally consider barriers to entry (such as the TPIN registration and annual fee) a distortion to market equilibrium which would reduce societal welfare UNLESS the benefits of correcting market failures (the damage done by incompetent preparers) exceeded this cost. Some realistic examples of people who will be hurt by the TPIN: women with tax skills and more than one preschooler who might prefer to stay home and prepare a dozen or three tax returns for fun money and retirees who may want to do a few dozen tax returns to supplement Social Security. For those preparing a small number of returns, the fees and paperwork is a significantly greater aggrevation than it is for tax preparers (whether EAs, CPAs or previously unregistered) who prepare hundreds of tax returns per year--and the "small-timers" may still be keeping up with CPE and changes in tax law.

Another facet of the Alban "Licensure" article which I mentioned in a Tick Marks post is that Alban actually agrees with you that the exemption given to attorneys and CPAs is unfair (his reasoning--political connections of attorneys and CPAs).