Last year, Internal Revenue Service (IRS) Commissioner John Koskinen announced the Annual Filing Season Program, a voluntary and temporary program intended to fill the holes left after the IRS lost the right to regulate tax preparers following Loving v. Commissioner. At the time, Commissioner Koskinen called the program “not the ideal solution” and was hopeful that Congress would enact a proposal that would give the IRS the authority for mandatory oversight of return preparers.
He wasn’t alone. Nina E. Olson, the National Taxpayer Advocate, has long been a proponent of tax preparer regulation: she has been urging Congress to move forward on such a program since 2002. Post-Loving, Olson has pushed Congress to pass legislation to authorize the IRS to reinstate the RTRP program.
Now, more than a year – and a few more lawsuits – after Loving, it appears that both Commissioner Koskinen and Taxpayer Advocate Olson may get their wishes.
On Wednesday, the Senate Finance Committee, led by Committee Chair Orrin Hatch (R-UT) and Ranking Committee Member Ron Wyden (D-OR), will mark up an original bipartisan bill that will, among other things “help root out the bad actors who pose as law-abiding return preparers” as a step towards protecting taxpayers from identity theft and fraud.
The proposal, as written, would provide the Department of the Treasury and the IRS the authority to regulate “all aspects of Federal tax practice, including paid tax return preparers.” Specifically, the proposal would amend Title 31 of the U.S. Code (“Money and Finance”) to encompass all aspects of federal tax practice “without regard to whether or not it includes representation before the Treasury.” That distinction is important since Title 31 already regulates certain paid tax return preparers such as attorneys, certified public accountants (“CPAs”), enrolled agents and enrolled retirement plan agents. The new language would target those outside of those designations and would include the preparation of tax returns for compensation. In other words, in a post-Loving world, the Loving rulings would be “overridden legislatively.”
What does this mean for tax professionals? Preparer tax identification numbers (PTIN) remain in play: tax professionals who prepare returns for compensation will have to maintain a valid PTIN. Also, expect the return of exams and continuing education credits.
What does this mean for taxpayers? Congress, IRS and the Taxpayer Advocate believe that it means better service and more competent representation. Those of you who have followed my coverage of the original proposal to regulate tax preparers (as announced by former IRS Commissioner Doug Shulman) and subsequently, Loving, know that I ‘m not so sure. I’ve long believed that the attempts to regulate tax preparers have too many holes (your trademark attorney would be allowed to prepare tax returns without oversight but a long time tax preparer would not), held the potential for increased prices to consumers, is somewhat duplicative (mechanisms already exist for dealing with unscrupulous preparers) and ultimately, will create an uptick in the black market of so-called “ghost preparers.” It’s my feeling that the bad guys are the bad guys: forcing you to take ethics courses doesn’t change that. Incompetent and lazy preparers are incompetent and lazy: forcing someone to sit through continuing education courses (likely while text messaging, trust me, I’ve been a speaker at these things) doesn’t make that person smarter or more conscientious. The reality is that smart, competent tax professionals do the right things already. But that doesn’t make for good press. So, instead, we add more layers.
The Senate Committee on Finance, as part of the proposal, is encouraging the Department of the Treasury and the IRS to act “expeditiously” on those matters. “Expeditiously” is, of course, an interesting choice of words. Congress hasn’t exactly sprinted to IRS’ assistance on the regulation of preparers before now. It was noted – repeatedly – as IRS litigated Loving that the whole matter could have been avoided if Congress would just give the word. They didn’t. Now, it looks like that could change. Stay tuned.
(Update: Dan Alban (@Frimp13), who successfully argued against IRS in Loving, noted: IRS *already* regulates tax preparers under numerous federal statutes & regs – new bill would authorize #licensing. His correction is reflected in the headline. Thanks, Dan.)
