The regulatory crackdown on tax preparers continues, and just in time for tax season. And once again, CPAs apparently have dodged the bullet.
In 2008, Maryland's General Assembly passed the Maryland Tax Preparers Act, which protects taxpayers from unscrupulous tax preparers and wisely exempts CPAs from its rules. In 2009, New York passed a taxpayer registration rule which exempts all CPAs from having to comply. A handful of other states also required tax preparers to register or follow other regulations.
Now, the movement is going national.
The IRS has released the results of a study that proposes a slew of new rules and regulations for tax preparers. Quoting directly from the IRS, those recommendations include the following:
“Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.” “Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.” “Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.” “Extending the ethical rules found in Treasury Department Circular 230 — which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS — to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.”
The IRS says the proposals “will take several years to fully implement and will not be in effect for the current 2010 tax season.”
The good news, as noted above, is that CPAs would be exempt from most of the proposed regulations.
The troubling notion, as the AICPA stresses, would be any effort to certify tax preparers who have limited qualifications. “A new IRS examination process may cause confusion among taxpayers about the relative qualifications of tax return preparers,” said AICPA President and CEO Barry Melancon.
We've said it here before, but if the IRS is serious about regulating tax preparers, it would be wise to follow Maryland's lead. In addition to exempting CPAs from its requirements, the Maryland Tax Preparers Act calls for publicizing both the qualifications of tax preparers and the fact that the registered tax preparers are not CPAs, tax attorney or enrolled agents. It also limits the use of terms like “licensed” and “certified” so as to not confuse the public, and it reserves at least one seat on the new State Board of Tax Preparers for a CPA.
Amid all of this economic uncertainty, the public is crying out for more transparency and financial expertise. Why would we muddy the waters and risk confusing taxpayers by not including logical safeguards like these?
The IRS's proposals could offer important protections for taxpayers … if they're done right. We'll be following the plan with keen interest and keeping you posted on its progress.