IRS Unveils Multi-Prong Plan for Regulation of Tax Preparers
By Diane Freda
Publication date: 01/05/2010
The Internal Revenue Service Jan. 4 announced the outcome of a six-month review of tax preparers, outlining a sweeping new effort to regulate the industry through enforcement and education.
Calling it “a game-changing event for the tax system,” Internal Revenue Service Commissioner Douglas Shulman announced a multipronged approach that he said would improve tax compliance, give taxpayers confidence in the tax system, and help encourage better service.
Under the new plan, everyone who files a federal tax return as a paid preparer will be required to register and obtain a PTIN (preparer tax identification number) from IRS, Shulman said in a call with reporters. Tax preparers will be required to renew that registration every three years.
All tax preparers except attorneys, certified public accountants, and enrolled agents—practitioners governed by the ethical standards of the Treasury Department's Circular 230—will be required to pass a competency test and undergo continuing education each year under the plan, he said.
“The study's results represent a monumental shift in the way the IRS will interact with tax preparers,” Shulman said, “setting higher standards for the entire tax preparation community.”
To that end, Shulman said the ethical rules of Circular 230 will be extended to cover all signing and non-signing tax preparers, not just the CPAs, attorneys, and enrolled agents who currently fall under its jurisdiction. This will make them subject to discipline for unethical and unprofessional conduct, he added.
In addition to the 55-page return preparer review, IRS released a raft of information about the effort, including a news release (IR-2010-1) and fact sheet (FS-2010-1) on the new recommendations; a fact sheet on ensuring accurate return preparation (FS-2010-2); and a fact sheet on how to choose a tax return preparer and avoid preparer fraud (FS-2010-3).
New Public Database, OPR Enforcement
IRS will also create a public database. After the testing is implemented, there will be a searchable database the public can use to ensure that a tax preparer has taken the appropriate tests and is registered with the IRS, he said.
Added to this will be implementation of a comprehensive enforcement strategy to ensure that all preparers meet the new requirements. IRS will put significant examination and collection resources to return-preparer cases and will increase the staffing of the Office of Professional Responsibility to allow for investigation of tax preparer misconduct, Shulman said.
Lastly, he said IRS will be establishing a task force to assess tax preparation software and its impact on tax preparation, as well as a working group that continues to focus on the refund settlement product industry and options to improve refund delivery options.
Many of the new requirements will not apply to the current 2010 filing season but will be implemented through new regulations for future filing seasons, Shulman said.
But a number of new measures will take place for the 2010 filing season, he said. The week of Jan. 4, the service will mail letters to about 10,000 paid tax preparers nationwide with large volumes of specific returns where the IRS typically sees errors.
Thousands of them also will get a visit from IRS agents in coming weeks to discuss their obligations under the plan, IRS said.
Reaction to Rules Generally Positive
Reaction to the long-awaited rules was generally positive.
Increased accountability and competency of tax preparers will improve customer service and help protect against scams that cheat both taxpayers and the U.S. Treasury, Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Sen. Charles Grassley (R-Iowa), said in a joint statement released Jan. 4.
Stricter oversight will improve accuracy in tax preparation and help to narrow the tax gap, which costs American taxpayers $345 billion each year, Baucus said.
Rep. Jose Serrano, chairman of the House Appropriations Subcommittee on Financial Services and General Government, said Jan. 4 that he could think of no agency taking a bigger step than the IRS did with this action to put the government on the side of the people.
“The IRS went the whole way,” Jeff Trinca, a lobbyist with Van Scoyoc Associates, told BNA Jan. 4. They laid out the case for the plan and came out with the strongest possible solution, he said, and they thought through tough issues like transition. “I'm very impressed. In 25 years of watching them, I have never seen them do anything this gutsy.”
Frank Degen, a New York enrolled agent, told BNA he was pleasantly surprised that IRS was able to go forward with the plan without having to seek congressional approval, which might have led to delays. Instead, the plan includes all the pillars enrolled agents had sought: competency through testing continuing education, and oversight by OPR.
CPAs Question Testing
One group that was not completely pleased with the outcome were the CPAs. While the plan has some good aspects, such as the common PTIN, Tom Ochsenschlager, AICPA vice president for taxation, told BNA that 15 hours of continuing annual professional education, as outlined under the plan, is not enough to ensure competency. There is also the possibility that testing to determine competency will create confusion in people's minds, he said. Instead, AICPA had hoped that IRS would address incompetent and wayward tax preparers by focusing on them individually, using enforcement tools to follow up.
The complete text of this article can be found in the BNA Daily Tax Report, January 5, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
IRS Unveils Multi-Prong Plan for Regulation of Tax Preparers
By Diane Freda
Publication date: 01/05/2010
The Internal Revenue Service Jan. 4 announced the outcome of a six-month review of tax preparers, outlining a sweeping new effort to regulate the industry through enforcement and education.
Calling it “a game-changing event for the tax system,” Internal Revenue Service Commissioner Douglas Shulman announced a multipronged approach that he said would improve tax compliance, give taxpayers confidence in the tax system, and help encourage better service.
Under the new plan, everyone who files a federal tax return as a paid preparer will be required to register and obtain a PTIN (preparer tax identification number) from IRS, Shulman said in a call with reporters. Tax preparers will be required to renew that registration every three years.
All tax preparers except attorneys, certified public accountants, and enrolled agents—practitioners governed by the ethical standards of the Treasury Department's Circular 230—will be required to pass a competency test and undergo continuing education each year under the plan, he said.
“The study's results represent a monumental shift in the way the IRS will interact with tax preparers,” Shulman said, “setting higher standards for the entire tax preparation community.”
To that end, Shulman said the ethical rules of Circular 230 will be extended to cover all signing and non-signing tax preparers, not just the CPAs, attorneys, and enrolled agents who currently fall under its jurisdiction. This will make them subject to discipline for unethical and unprofessional conduct, he added.
In addition to the 55-page return preparer review, IRS released a raft of information about the effort, including a news release (IR-2010-1) and fact sheet (FS-2010-1) on the new recommendations; a fact sheet on ensuring accurate return preparation (FS-2010-2); and a fact sheet on how to choose a tax return preparer and avoid preparer fraud (FS-2010-3).
New Public Database, OPR Enforcement
IRS will also create a public database. After the testing is implemented, there will be a searchable database the public can use to ensure that a tax preparer has taken the appropriate tests and is registered with the IRS, he said.
Added to this will be implementation of a comprehensive enforcement strategy to ensure that all preparers meet the new requirements. IRS will put significant examination and collection resources to return-preparer cases and will increase the staffing of the Office of Professional Responsibility to allow for investigation of tax preparer misconduct, Shulman said.
Lastly, he said IRS will be establishing a task force to assess tax preparation software and its impact on tax preparation, as well as a working group that continues to focus on the refund settlement product industry and options to improve refund delivery options.
Many of the new requirements will not apply to the current 2010 filing season but will be implemented through new regulations for future filing seasons, Shulman said.
But a number of new measures will take place for the 2010 filing season, he said. The week of Jan. 4, the service will mail letters to about 10,000 paid tax preparers nationwide with large volumes of specific returns where the IRS typically sees errors.
Thousands of them also will get a visit from IRS agents in coming weeks to discuss their obligations under the plan, IRS said.
Reaction to Rules Generally Positive
Reaction to the long-awaited rules was generally positive.
Increased accountability and competency of tax preparers will improve customer service and help protect against scams that cheat both taxpayers and the U.S. Treasury, Senate Finance Committee Chairman Max Baucus (D-Mont.) and ranking member Sen. Charles Grassley (R-Iowa), said in a joint statement released Jan. 4.
Stricter oversight will improve accuracy in tax preparation and help to narrow the tax gap, which costs American taxpayers $345 billion each year, Baucus said.
Rep. Jose Serrano, chairman of the House Appropriations Subcommittee on Financial Services and General Government, said Jan. 4 that he could think of no agency taking a bigger step than the IRS did with this action to put the government on the side of the people.
“The IRS went the whole way,” Jeff Trinca, a lobbyist with Van Scoyoc Associates, told BNA Jan. 4. They laid out the case for the plan and came out with the strongest possible solution, he said, and they thought through tough issues like transition. “I'm very impressed. In 25 years of watching them, I have never seen them do anything this gutsy.”
Frank Degen, a New York enrolled agent, told BNA he was pleasantly surprised that IRS was able to go forward with the plan without having to seek congressional approval, which might have led to delays. Instead, the plan includes all the pillars enrolled agents had sought: competency through testing continuing education, and oversight by OPR.
CPAs Question Testing
One group that was not completely pleased with the outcome were the CPAs. While the plan has some good aspects, such as the common PTIN, Tom Ochsenschlager, AICPA vice president for taxation, told BNA that 15 hours of continuing annual professional education, as outlined under the plan, is not enough to ensure competency. There is also the possibility that testing to determine competency will create confusion in people's minds, he said. Instead, AICPA had hoped that IRS would address incompetent and wayward tax preparers by focusing on them individually, using enforcement tools to follow up.
The complete text of this article can be found in the BNA Daily Tax Report, January 5, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2009, The Bureau of National Affairs, Inc.
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