The IRS plans to require tax preparers to pass a test and register with the government to better police a largely unregulated industry used by most taxpayers. The Internal Revenue Service said there could be more than a million people offering tax preparation services. Most offer sound advice, IRS Commissioner Doug Shulman said, but many don't and the agency knows little about them.
"Taxpayers will get improved service and enhanced standards from tax preparers, and they'll have less risk that they'll get bad advice," Shulman said. "The tax preparation industry will get more consistency and a level playing field."
Mark Dacy serves as district manger for Jackson Hewitt in Georgia working out of the Statesboro administrative office. Jackson Hewitt is a national tax preparation company with 6,600 offices nationwide. "Our company has pushed for regulation of our industry for some time," Dacy said. "We think it is very important that tax preparers be properly educated so that they can provide proper and professional service to their clients. Our preparers have to pass a test every year before tax season starts. There is a continuing education component as well."
Dacy said it is also paramount that a tax preparer be able to recognize when a taxpayer is presenting fraudulent information. "We think it is extremely important that accurate information is submitted on tax returns. Everyone needs to pay the appropriate tax that they owe. We are all taxpayers, and we all bear that responsibility."
The new regulations, announced a week ago, won't be in effect for the current filing season - individual tax returns are due April 15. But Shulman said tax preparers will be held to higher standards in future years as the IRS steps up its oversight to help reduce fraud and errors.
Shulman said he hopes to have all paid tax preparers registered by the 2011 filing season. Preparers will be given about three years to meet competency requirements, though there is much work to be done to develop standards and tests. Eventually, tax preparers will be required to complete annual training and will be subject to penalties for unethical conduct, Shulman said. Taxpayers will be able to check the credentials of preparers on a public IRS database.
"We think this is incredibly important to the entire tax system that when people pay good money for a tax return preparer, they don't get bad advice," Shulman said.
Judy Joyner, manager of Suncoast Tax and Loan on Northside Drive, said she isn't happy with change, but will abide by whatever regulations are put into place.
"Everything is regulated now, and we will do whatever is required," she said. "You have to do things the right way, there is no other way. So we will certainly abide by the regulations that are put into place. My understanding is that if you have a lot of errors on the returns that you file, you will get a visit."
Though the new regulations aren't in place yet, Shulman said the IRS is stepping up enforcement this tax season. He said the IRS will send notices to 10,000 preparers who have had frequent errors. He said agents will also visit thousands of tax preparers. Some of the visits will be announced ahead of time; others will not. In some visits, agents will pose as taxpayers to see if they get accurate advice, Shulman said.
Local CPA Edwin Hill said he can only see positives with the new regulations. "I think it is important that there be some accountability in the tax preparation industry," he said. "I am not saying that forms aren't being completed accurately, the perception is that there is some noncompliance out there. The government wants to insure that the people performing this service are aware of the law and comply with the law. There has been a lot of abuse in certain areas, and this will certainly help address that. I think it is all very positive."
Shulman said new registration requirements should help the IRS identify problem preparers. He estimated there are between 900,000 and 1.4 million people who are paid to prepare tax returns. He said the agency will have a better handle on the number once they have to register. Many professional organizations and tax preparation companies have said they would support increased oversight.
"I believe it will improve services to the general public," said Cindy Hockenberry, research coordinator for the National Association of Tax Professionals. "The comfort level will go up a little bit because the taxpayer will know that somebody is looking over this industry. In the past when just anybody could put out their shingle and do a return, that was just kind of a hotbed for unscrupulous behavior."