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Tax preparers may now need a license
An H&R Block tax office in San Francisco.
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TEXT OF STORY
Kai Ryssdal: Don't know about you, but by far the biggest check my wife and I wrote this year was to the Internal Revenue Service. I'll spare you the details, but I'd bet my experience isn't unique. For a lot of us, paying taxes is one of our larger transactions. Which is why it's disquieting to learn that most paid tax preparers out there are unlicensed and completely unregulated. Marketplace's Steve Henn reports.
STEVE HENN: If you walk in to an office of a big chain that prepares taxes, chances are you are not going to sit down across from a CPA -- a tax attorney -- or even a licensed tax preparer.
MICHAEL BROSTEK: Most of the paid preparers that would be in store fronts for instance during the tax season are not regulated by anyone.
Michael Brostek works at the Government Accountability Office. Brooke Millington runs her own tax preparation firm.
HENN: But to do what you are doing now and to start you business, you didn't have to pass any tests.
BROOKE Millington: No, I could've just opened up a store front and said I'll do your taxes, I could've done it from my home, I could've set up a booth on the street.
Millington says the quality of some tax services out there is atrocious.
MILLINGTON: I hear a lot of stories.
Brostek was hearing stories, too, so the GAO went undercover to test the accuracy of tax preparation services. They went into 19 store fronts and...
BROSTEK: Everybody made at least one error.
Some made big ones worth thousands of dollars.
DOUG SHULMAN: I think this is incredibly important.
Doug Shulman runs the IRS.
SHULMAN: When people pay good money they shouldn't get bad advice.
So Shulman told members of Congress today that the IRS is going to propose new standards for tax preparers by the end of the year. Brostek at the GAO says in Oregon preparers already have to take a simple test before they can set up shop. He says returns there are more accurate and that saves the Feds roughly $390 million a year in that state alone.
In Washington, I'm Steve Henn for Marketplace.
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Licensing and regulation are a good thing, but nothing can compete with consumer competence. Even if we made all hopefuls take a tax class before they could <a href="http://fastforwardacademy.com/index-page-irs-paid-registered-tax-prepare... a tax preparer</a> there is no way of ensuring no mistakes will be made. No, education on the part of the tax-payer is the best safeguard against these kinds of misfortunes.
The idea of licensing people sounds good, but... I am an (unlicensed) tax preparer. Most of the people I deal with come to me because "enrolled" (yes, I'm talking to you, H&R Block) tax preparers have messed up their returns. Licensing is not a cure-all in this industry or any other. Who out there has never been to a bad doctor, mechanic, et cetera who is "licensed". Perhaps regulation would make more sense than licensing. There should be a system to receive and track complaints with non-arbitrary penalties clearly stated. Licensing tends to be a joke at best, a money racket at worst. Please don't put more burden on the little guy. We're already under enough pressure. Thanks.
It's not that tax preparers need to be licensed. That won't fix the problem with too many errors. What's needed is an overhaul of the tax system making it more simple to prepare tax returns. I've been preparing tax returns for over 20 years and I've seen CPA's and EA's make some of the most obvious errors. It's not the degree or the certification. It's the ability of Congress to simplify the tax code. It's so complex it makes no sense most of the time.
In one sense, at least, it is indeed "too much to ask" for all paid tax preparers to be licensed. That is, if you think about it, the tax code was never intended to be so onerous that one could not prepare one's own return. If you agree with that, then what special qualifications should a person need to prepare a tax return for another? Perhaps the authorities could/should draw a distinction between return preparers and those accountants who offer tax advice.
Preparers should be required to be licensed. From what I am reading the Oregon test is quite simple and encompasses much of what a preparer should know in any case. To become an Enrolled Agent I took a very extensive exam, much more complicated than what is proposed to becom licensed. Is it too much to ask that other preparers know at least some rudimentary tax code issues?
In order for preparers to send in forms electronically for refunds, preparers have to have an IRS authorized tax program along with an EFN number. If these programs meet their requirements, why send individuals to workshops or schools to become license? I took a course in 1999 at the community college and prepared taxes since then; will I need to start all over?
I think most of my customers come to unenrolled preparers because they cannot start to afford CPAs or Enrolled Agents and are afraid they will fill out the forms incorrectly. My prediction is a lot less people filing when there is no one to help them without charging a big fee.
Yes, I have heard it won't be expensive to become licensed but I'm not buying it. Expensive is a relative term. I do less than 25 returns a year. The expenses involved will include travel to seminars, fees for more classes, testing, licenses and the biggie "time" we could have been doing paying work. To cover all that with just 25 returns will make my rates as prohibitive to my customers as the CPAs and Enrolled Agents.
Your story failed to ask government officials one key question: Isn't the Tax Code too complicated? How often do IRS staff fail to answer a question correctly on a tax matter? The problem here isn't regulating a group of people who prepare taxes. I'm not an enrolled agent, but I do take more than 30 hours of classes each year to prepare for tax season. And every year, either Congress or the IRS make last-minute changes, or even changes in the middle of tax season that complicate taxes even further. The failure here stems from the federal government, not the people trying to interpret the federal government.
It’s not the tax preparers, it’s the tax code.
Try contacting the IRS multiple times with the same question and see how many different answers you get. If the IRS doesn’t understand the code how can you expect anyone to understand it? The IRS will always give you a disclaimer stating that their answer may not be correct.
Simple Question: How do I avoid penalties on withdrawals from an inherited IRA?
Answer: You must make annual RMD using your age to avoid penalties. Except the first year you must use the age of the original owner, except in 2009 when all RMD’s are suspended. Inherited IRA’s are exempt from the rule that all withdrawals prior to age 59 and 1/2 pay a penalty.
With answers like this how could anyone know it all? Don’t fault the tax preparer, fault the tax code.
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