What's next for return preparer regulation?

[Yardley CPA]

Article from today's CPA Letter Daily:

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2014/Tax/DrawingBoard.jsp

[FreedomTaxed]

Regulating tax preparers to that degree was just silly. And I'll tell you why:

1. You can prepare you own taxes anyway.

2. Despite being prepared by somebody else, you're still responsible for your own tax returns.

That the IRS demanded preparers have a silly number is itself a gross imposition. Further regulation was just beyond the pale.

[Carolbeck]

Article from today's CPA Letter Daily:

http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2014/Tax/DrawingBoard.jsp

Well here is what the Governor of New York States is doing:

Governor Cuomo Announces New Regulations to Protect Consumers Who Hire Tax Preparers

Warns New Yorkers to use caution when selecting a preparer

File a complaint about an unethical tax preparer by calling 518-530-HELP

[1]

Albany, NY (March 3, 2014)

Governor Andrew M. Cuomo today announced historic new regulations that will better protect New York consumers who hire a tax preparer. The regulations make New York one of only four states that regulate the tax preparer industry.

The comprehensive rules - covering 40,000 paid tax preparers throughout the state - will reduce errors and omissions on tax returns, reduce fraud and increase the level of competence and ethics among preparers.

"With 70% of New York taxpayers depending on a tax preparer to file their taxes, we need to ensure clear standards exist to prevent fraud and protect consumers,” Governor Cuomo said. “These new regulations will better protect New Yorkers who use tax preparers by requiring minimum qualifications and professional practices within the industry. In addition to these changes, I urge those putting their trust in a preparer to also do their homework: check the internet, get a referral, and make sure the person you hire is legally registered with the State Tax Department.”

Preparer scams to avoid

Governor Cuomo warned New Yorkers to be on guard for unethical actions by tax preparers, such as:

• Advertising or promising in-person to do an income tax return for a low price, but then billing the client for a much higher fee, arguing the return was more complicated than originally anticipated.
• Convincing a client to have their refund deposited into the preparer’s account instead of the client’s, and then the preparer covertly steals a portion of the refund.
• High-interest loans – often with unclear terms - offered by preparers prior to refunds being received.

Taxpayers should also avoid hiring tax preparers who offer to use illegal means to increase the amount of a refund.

“What unsuspecting taxpayers don’t realize when they agree to file false information on a return, is that they, in the end, will end up paying – perhaps steeply - for these fraudulent filings,” warned Commissioner of Taxation and Finance Thomas H. Mattox. “They are paying hard-earned money for advice that jeopardizes their future financial stability.”

Identifying and stopping fraud

The Tax Department continually investigates and arrests preparers for criminal activity. In addition, a new Fraud Analysis and Selection Team (FAST) detects large-scale tax preparer schemes. In just the past year alone, FAST has identified and stopped more than $26 million in improper refund payments.

Recent examples of tax preparer arrests include:

• Joseph Barrios, Jr., [2] 50, Mahwah, NJ, who will serve 6 months in Riker’s Island
• Susan Pemberton, [3] 43, Rockville Center, sentenced to up to 3 years in prison
• Crystal Sweet, [4] 38, Gloversville, sentenced to up to 6 years in prison
• Christopher Curry, [5] 40, Westbury, sentenced to up to 3 years in prison
• John Berry, [6] 42, Dunkirk, charged for filing returns using the names of 42 deceased people
• Chiara Hudson, [7] 24, Bronx, sentenced to up to 4 ½ years probation

New York’s first tax preparer regulations

Since 2011, the majority of tax preparers have been required to register annually with the Tax Department. Building on the registration, for the first time in New York State, most individuals who are paid to prepare at least ten New York State tax returns in a year will be required to:

• Pass a State competency examination
• Be at least 18 years of age and be a high school graduate, or possess the equivalent of a high school degree
• Meet applicable IRS requirements
• Take four hours of annual continuing education
• Beginning tax return preparers (with less than three years of experience preparing New York State tax returns) must take a 16-hour basic tax course

Violation of the new standards could result in a range of disciplinary actions, from remedial education to suspension or cancellation of a preparer’s registration.

Attorneys, certified public accountants, public accountants and enrolled agents are exempt from the regulations, but are required to meet specific professional standards set forth by their licensing agencies - and may be subject to formal sanctioning if they fail to meet those standards - as part of their professional certification.

[Lee B]

We have had tax preparer regulation in Oregon since 1973. Overall I think it's been good thing.

[Carolbeck]

We have had tax preparer regulation in Oregon since 1973. Overall I think it's been good thing.

I totally agree about the regulations! but it just annoys the HE%% out of me that the presumption is that ALL Tax Preparers are bad, all commit Identity theft. Almost putting us in the category of "Used Car Salesman"

[HV Ken]

When we see the quality of some of the returns performed by paid preparers, it makes me a fan of regulation. I took and passed the RTRP exam - I thought it was a decent attempt to separate those who shouldn't be preparing from those who at least have a basic understanding of what it takes to prepare returns for a living, or even a side job. I am among those in support of the RTRP program.

[David1980]

I think preparer regulation is a good thing and look forward to when congress gives the IRS the authority.

There are a lot of "preparers" out there that don't understand the difference between a refundable credit and a non-refundable credit. Very basic things. Why would they? No training required, no special knowledge. Anyone can be a tax preparer. They were good at doing their own return in Turbotax so they decided to buy software (or they continue to use Turbotax for their clients) and start doing it for money.

True, individuals can do the return on their own and nobody is suggesting the individual taxpayer be regulated. The paid preparer has the potential to do significantly more damage than the individual doing their own return. If I'm a paid preparer that "specializes" in doing returns with lots of non-legitimate deductions I can grow a very successful practice. Deducting things like per diem for fire fighters makes me a popular tax preparer and I can systematically claim bogus deductions on hundreds (or thousands of returns - with hired help) of returns. And it's not that I'd be a dishonest preparer - I just didn't know any better.

So I see it as a question of how much impact the different people in tax preparation have. One taxpayer claiming some bogus deductions affects one return. A preparer that preparers hundreds or thousands of returns with bogus deductions has much higher impact. I suppose the regulation of tax preparers