IRS to start regulating paid tax preparers

[JRS]

http://www.irs.gov/newsroom/index.html?portlet=5

[kcjenkins]

A note from Commissioner Shulman to all IRS Employees:

I hope everyone enjoyed the holidays. With the arrival of the New Year, I am pleased to announce an important milestone in our work on the Tax Return Preparer Review project. When we published our five-year strategic plan a year ago, we highlighted the need to ensure that tax return preparers were part of our overall game plan to strengthen the U.S. tax system. Today, we are recommending some important changes to our oversight of the tax return preparer community, including:

* Requiring registration for all paid tax return preparers.

* Establishing mandatory testing and continuing education for paid tax return preparers who do not already have this kind of requirement (i.e. exempting attorneys, certified public accountants and enrolled agents).

* Developing a public database so that the public can ensure that their tax return preparer is registered with the IRS.

* Making all return preparers subject to the ethical standards of Treasury Circular 230 and subject to discipline by the IRS.

* Increasing our enforcement presence in the tax return preparer community.

The IRS has engaged the public and stakeholders since last summer in a wide-ranging review of issues involving tax preparation, and we have received more than 500 thoughtful recommendations from employees througout the Service. With the findings and recommendations outlined in the Return Preparer Review <http://www.irs.gov/pub/irs-utl/54419l09.pdf> final report, the IRS is taking a big step toward meeting our strategic plan goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax return preparers.

Clearly, it's going to take some time to put these important changes in place, and they do not affect the current filing season that starts today. However, we are taking immediate steps to help taxpayers during the 2010 filing season. We want to make sure return preparers are doing the right thing and filing returns accurately. Starting today, the IRS is sending letters to approximately 10,000 paid preparers who have large volumes of specific types of tax returns where the IRS typically sees frequent errors. In the coming weeks, thousands of preparers will be visited by revenue agents. And throughout the filing season, we'll be working to provide taxpayers basic tips to help them select a reliable preparer.

Implementation of the Return Preparer Review recommendations will require considerable work and effort and will affect employees from across the IRS, but I believe these changes will transform the American tax system. As we implement these changes, we will be seeking your assistance and will keep you informed of our progress.

Thank you to all of you whose hard work brought us to this point, and thank you in advance to those of you who will implement these important changes. I look forward to this effort continuing, and I look forward to working with you in the new year.

--Doug Shulman

[mcb39]

Starting today, the IRS is sending letters to approximately 10,000 paid preparers who have large volumes of

specific types of tax returns where the IRS typically sees frequent errors.

I received a letter today in regard to preparing tax returns without the form S2, W2G or 1099R in hand befoe filing.

Interesting. They can visit me if they want to. I will try to find an empty chair. Research materials are coming in so fast, organizers are being prepared, etc. Even the UPS man today said, "It's Tax Time1".

[Pacun]

"I received a letter today in regard to preparing tax returns without the form S2, W2G or 1099R in hand befoe filing."

I received that letter also. Are we part of the 10,000 or this was sent out to every efile site?

[redux]

* Establishing mandatory testing and continuing education for paid tax return preparers who do not already have this kind of requirement (i.e.

exempting attorneys, certified public accountants and enrolled agents).

It's so nice to know that these folks are exempt from the new rules because we all know that they are the most ethical among us.

Here's proof:

Calif. Investigates Suspect Tax Preparer

The California Department of Consumer Affairs says it is investigating certified public accountant William R. Murray, who is accused of bilking more than $8.5 million from former clients.

MORE DETAILS: www.kcra.com/tu/5McsowA3Z.html

[Jack from Ohio]

<<<Thousands of the preparers who receive these letters will also be visited by IRS Revenue Agents in the coming weeks to discuss their obligations and responsibilities to prepare accurate tax returns.>>>

And just where will all the IRS Revenue Agents come from to make these visits? Seems I remember the IRS budget being cut, and it seems they don't have enough employees to take care of what they have to do now...

I guess they are counting on the Fear Factor to do their work.

The letter about W2s went to everyone last year. My personal practice has 150+ clients, and I got one last year.

[mcb39]

1. Ironically, I did not receive the letter last year. It kind of makes you feel like someone is looking over your shoulder and I have honestly NEVER filed a return without Information forms in hand.

2. I did take slight offense at this statement: exempting attorneys, certified public accountants and enrolled agents). How does one measure one of the above who, perhaps, has rarely, if ever, prepared an income tax return........against 30 plus years of dedicated work and experience? :huh:

[taxguy057]

All the requirements they're asking for, we as ERO already comply too; suitability test, PTIN, EFIN, CIR 230. CPE not required, but I do 16 hrs per year anyway. I just hope this test isn't going to be so complex that it would just be better to take SEE or CPA exam. I got a feeling this exam they're talking about giving is going to be more than what's been lead on to be.... :(

[Don in Upstate NY]

... I just hope this test isn't going to be so complex that it would just be better to take SEE or CPA exam. I got a feeling this exam they're talking about giving is going to be more than what's been lead on to be....

Or it could be like the test that the IRS currently mandates for its volunteers (VITA and TCE programs.) Like the proposed paid preparer test, it comes in various certification levels - Basic, Intermediate, Advanced, International, etc. It never gets to the point where it would be suitable for the general paid preparer, but could well serve as the test for the lower level certification. Check it out at http://www.irs.gov/pub/irs-pdf/f6744.pdf

[Booger]

1. Ironically, I did not receive the letter last year. It kind of makes you feel like someone is looking over your shoulder and I have honestly NEVER filed a return without Information forms in hand.

2. I did take slight offense at this statement: exempting attorneys, certified public accountants and enrolled agents). How does one measure one of the above who, perhaps, has rarely, if ever, prepared an income tax return........against 30 plus years of dedicated work and experience?

I must take exception to the negative comments regarding CPA's on our blog here. If some of you don't know, I'll

ENLIGHTEN you. One of the fields of expertise of CPA'S is taxation. So before some of you slam people who have

taken the time to get a 4 year college degree, and THEN take an exhausting 3 to 4 day exam (where the %age of

people passing all parts the first time is LOWER than bar exam candidates),I would suggest some of you try it.

Booger, CPA (And proud of it)

[Gail in Virginia]

* Establishing mandatory testing and continuing education for paid tax return preparers who do not already have this kind of requirement (i.e.

exempting attorneys, certified public accountants and enrolled agents).

It's so nice to know that these folks are exempt from the new rules because we all know that they are the most ethical among us.

Here's proof:

Calif. Investigates Suspect Tax Preparer

The California Department of Consumer Affairs says it is investigating certified public accountant William R. Murray, who is accused of bilking more than $8.5 million from former clients.

MORE DETAILS: www.kcra.com/tu/5McsowA3Z.html

I don't think these professions are exempt because they are considered more ethical, but rather because they have already been required to take and pass a test demonstrating their competency before they obtain their designation. Having passed the EA or CPA exam, or the bar exam, they are presumed to have demonstrated competency and have been required to take CPE ever since they were admitted to practice. There is no way to weed out in advance the unethical - they can only be pruned after they have demonstrated that they are not willing to follow ethical standards. What this test seeks to do is weed out the incompetent. I personally supported grandfathering in those with at least a few years of experience and only requiring that they take continuing education to continue practicing. But I also think that having passed the two day EA exam demonstrating a minimum knowledge of tax law, and having kept my education requirements current, I should not have to take another test just to prove I am competent to prepare tax returns.

Gail Abbott, EA

[Pacun]

How will they grandfather someone with 5 years of experience?

Experience means a lot but sometimes means nothing. How about the tax preparer who only prepares 11 paid returns every year and has done it for 30 years? How about the preparer who works at a big office and only deals with some type of returns for 6 years? How about some one who prepares 300 diverse returns by himself or herself and has done it for 30 years? Who will testify on the experience of the 300 diverse returns person? I bet you the guy who only deals with limited returns at the big office will be the most qualified in the eyes of the IRS since a CPA might write a letter regarding that person's experience.

So, in order to be fair, I think exams should be given to everyone who is not a CPA, EA or Attorney.

[TAXBILLY]

* Establishing mandatory testing and continuing education for paid tax return preparers who do not already have this kind of requirement (i.e.

exempting attorneys, certified public accountants and enrolled agents).

It's so nice to know that these folks are exempt from the new rules because we all know that they are the most ethical among us.

Here's proof:

Calif. Investigates Suspect Tax Preparer

The California Department of Consumer Affairs says it is investigating certified public accountant William R. Murray, who is accused of bilking more than $8.5 million from former clients.

I hope you are not implying that because I am an EA I am therefore unethical.

taxbilly

MORE DETAILS: www.kcra.com/tu/5McsowA3Z.html

I hope you are not implying that because I am an EA I am not ethical.

taxbilly

[mcb39]

I don't believe that anyone here is slurring the ethics of professionals on this board or elsewhere. Some of us may have reacted in self-defense because of our experience. Nobody is chastising the education or expertise of Attorneys, CPAs and EAs. The fact is that some of these professionals are NOT automatically qualified to prepare tax returns because they chose to move on into other fields and not stay current with tax laws. I, myself, have some CPAs as clients. They would not begin to assume that they know more about tax law than I do. As for attorneys, most of us have had tax experiences with them a time or two. It all depends on whether they have stayed current with tax law; and many of them have not. As for EA certification, my belief is that practitioners who have pursued this title are to be admired and have enhanced their Tax Preparer credibility by taking and passing this difficult test. I have considered it myself over the years and am not afraid of it, but because of the distance I would have to travel and my age, I am now out of that loop. My apologies to anyone who has taken offense, and thanks to those who understand the experience issue.

[Lion EA]

Marilyn, now that the EA exam is given by Prometrics in all of their locations, you might find a closer site than when the IRS administered it in one or a few locations in each state. If so, that might make more sense for you than taking the new preparer exam where ever the IRS decides to give it in your state.

[JonesTaxPro]

I feel that this whole issue should be based on experience and the amount and types of tax returns that are being prepared by each individual. To lump everyone together is going to give people who should have more education the right to prepare taxes, while not allowing people who are more than qualified to have to take a test when they have proven themselves qualified/capable over the years. This needs to be a case by case evaluation. I realize that I am newer to this forum and have asked many of you questions over the years and you have all been very helpful (no matter what titles you have) As I said, experience is a very valuable asset and some have more experience than other and that should be taken into consideration with the IRS.

[Pacun]

I feel that this whole issue should be based on experience and the amount and types of tax returns that are being prepared by each individual. To lump everyone together is going to give people who should have more education the right to prepare taxes, while not allowing people who are more than qualified to have to take a test when they have proven themselves qualified/capable over the years. This needs to be a case by case evaluation. I realize that I am newer to this forum and have asked many of you questions over the years and you have all been very helpful (no matter what titles you have) As I said, experience is a very valuable asset and some have more experience than other and that should be taken into consideration with the IRS.

The IRS doesn't have the resource to evaluate experience on a case by case basis for a million preparers. Exams are already in the computers and will not create any extra burden on the IRS. So, no matter how we look at it, we better start studying for the exams.

About 5 years ago, I was able to pass all 4 exams for EA just by reading previous exams. Because I changed my name later on, I didn't get certified. I am going back to those exams again and see if I can pass them. Now you can take one at a time. CPAs are right, no way you will pass the CPA exams just by reading previous exams.

[GeneInAlabama]

I can't help but wonder how this testing requirement is going to affect the IRS pet, H&R Block. Also, if the tests are difficult enough to put a large number of preparers out of business it will help other preparers by allowing them to charge more, but will hurt the general public in increasing their costs which will hurt even more during these economic hard times. I agree that there are a lot of preparers that should not be in business and the public would be much better off without them. The problem is eliminating the bad ones without getting rid of those who do a good job. To clarify matters, I am not an attorney, CPA, or enrolled agent. I am an unlicensed preparer with 30 years experience and much yet to be learned. I believe the degree of difficulty of the test will determine whether it will be a good thing or a bad thing. Personally, I do not fear the test but would really rather not have to go through the hassel, especially at age 73. I think the important thing is how it is going to affect the general public.

[Joel]

GeneinAlabama,

"I agree that there are a lot of preparers that should not be in business and the public would be much better off without them"

My only concern is that these preparers will just not sign the return and enter "Self Prepared"

I am a member of NSTP and their approach with the IRS was for the IRS to have a massive education of the public that if they paid someone to prepare their return it is unlawful for them to sign the return without the preparers signature.

[bstaxes]

I agree with GeneInAlabama. I am unlicensed preparer, but I take courses. I have also taught for H&R many years ago. I real don't feel like traveling to take this test. I am also a retired teacher and I know some people can take tests and score high but may not be able to apply their learning, others fear a test but have the skills to apply their learning.

[Eli]

I received that letter also. Are we part of the 10,000 or this was sent out to every efile site?

I think each site did.

Eli

[Pacun]

I agree with GeneInAlabama. I am unlicensed preparer, but I take courses. I have also taught for H&R many years ago. I real don't feel like traveling to take this test. I am also a retired teacher and I know some people can take tests and score high but may not be able to apply their learning, others fear a test but have the skills to apply their learning.

I love to drop some bombs from time to time and this is one of those times.

In order to prepare taxes, you need to be able to pass a test and you need to be able to apply what you learn in school or courses. If you cannot do both, sorry, you shouldn't be in tax preparation business. This is no longer a profession for the semi-smart, semi-prepared person because too many changes happen every year.

Honestly, are you ready for this coming tax season? Are you semi-ready? Are you relying on your experience? Don't you wish you took a course?

[Gail in Virginia]

There is no perfect answer. I am afraid that I agree with Joel, that we will see an upswing in "self-prepared" returns. Truthfully, those are the preparers that concern me the most now. Many people are out there preparing returns with little or no training, and then not taking credit for what they do by marking the return self-prepared. With the new testing requirements, and the new e-filing requirements, and the registration requirement (with fee!) in NY, more "preparers" may start ducking out on their responsibility to sign their returns. I think some public education and awareness would go a long way to cleaning up our profession of the few bad apples.

[bstaxes]

I am willing to take a test and I am ready. Just finished a 2 day course and a 2 hour ethics course. Yes, I believe we should continue our education. I did not want to travel to take a test. Test centers are not that close to me and traffic is horrible. 60 miles could take 2-3 hours depending on rush hour.

I don't mind if you drop a bomb from time to time, it keeps the mind sharp.

[GeneInAlabama]

>>In order to prepare taxes, you need to be able to pass a test and you need to be able to apply what you learn in school or courses. If you cannot do both, sorry, you shouldn't be in tax preparation business. This is no longer a profession for the semi-smart, semi-prepared person because too many changes happen every year<<.

Then shouldn't ALL preparers be tested, including attorneys, CPAs, and enrolled agents?