The Internal Revenue Service commissioner is considering making rules that require all income tax preparers to be regulated.
This is a terrible idea and will impact the working poor, elderly, and those with simple tax returns the hardest.
The IRS believes that too many errors are being made on tax returns which is their sole justification for wanting to regulate tax preparers. If that is so, what they need to do is bring in a couple of process engineering experts to help them better design the tax forms which will reduce errors. Regulating tax preparers won’t necessarily resolve tax preparation errors. That is like comparing apples to oranges. The system is complex but can be engineered to meet the accuracy needs of the IRS while still making it affordable for those who cannot prepare their own return to afford hiring someone else to do it.
Keep in mind that during tax season, many volunteers (who will never be regulated) come into senior citizen centers across the country to help seniors complete their simple forms and get their $500 refund back. These seniors do not need the assistance of a CPA or even a professional tax preparation firm. If the cost to have a regulated preparer is $75.00 to prepare a very simple tax return, which would take 15% out of a senior’s refund. If the IRS chooses to implement a regulation plan than it should either offer more free (accountable) volunteer assistance to the poor and elderly out of their own ranks, or pay for training necessary to take a test to become regulated.
The American Institute of Certified Public Accountants (AICPA) believes something needs to be done to help correct tax return errors, but is not convinced that strictly regulating tax preparers is the answer. It blames the overly complex tax code for part of the problem and believes that regulated tax preparers will have to raise their prices pushing the costs down to the consumer. It argues that errors are more likely if one tries to prepare their own return and makes mistakes. Many people have never prepared their own tax returns.
Clearly if more taxpayers try to complete their own returns (in order to save money) and make more errors, then the IRS has not resolved anything and made matters much worse.
Business tax returns are much more complex and involved and it makes sense for an IRS Enrolled Agent (EA) or CPA to prepare them. There are also many personal tax returns that can be complex as well, and those individuals are using CPAs and EAs to prepare their returns. For businesses and taxpayers with complex returns, the price won’t go up, but the access to service will go down if suddenly these highly trained professionals are swamped with completing simple 1040s tax returns.
Write your congressman and senator urging them to apply pressure to the IRS commissioner to fix this problem like an engineer would, not like a politician.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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