January 13, 2010 by Robert Tharp at 4:42:08 pm
Beginning next year, the Internal Revenue Service plans to regulate paid tax preparers by requiring them to register with the government, pass competency tests and commit to a code of ethics. The agency's stated goal is to reduce the chance of errors and fraud by tax preparers, and provide an increased assurance of proper advice in preparing returns. "This represents a major expansion of the IRS role as a regulator of tax preparers," says Emily Parker of Thompson & Knight, a former IRS Acting Chief Counsel and Deputy Chief Counsel. "But there are also significant challenges due to the large number of preparers and the limited resources the IRS inherently has to enforce such regulations." It's estimated that as many as 1.4 million people work as paid tax preparers, and most are unregulated.
According to the New York Times, more than 80 percent of taxpayers use a paid tax preparer or tax software to complete their yearly returns. However, paid tax preparers are unregulated in many states, unless they are also lawyers, certified public accountants or enrolled agents who represent taxpayers before the I.R.S. Lawyers, certified public accountants and enrolled agents will not be affected by the new regulations. Though the new regulations will not be in place this year, IRS Commissioner Douglas Shulman said the I.R.S. was stepping up enforcement of preparers this tax season. He said the agency would send notices to 10,000 preparers who had had frequent errors. He said agents would 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 from preparers, Mr. Shulman said. Mr. Shulman said taxpayers should avoid preparers who promise larger refunds, or those who charge fees based on the size of the refund.
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