IRS wants tax preparers registered
TEXT OF INTERVIEW
Bill Radke: This week, the IRS announced it will for the first time require tax preparers to register with the government and keep their skills sharp. How effective will this be? Here’s Los Angeles Times business columnist David Lazarus. Good morning.
David Lazarus: Good morning.
Radke: I have to confess I assumed the IRS did screen tax preparers.
Lazarus: Well it’d be nice to think that, but apparently not. When IRS Commissioner Doug Shulman took the wraps off their new report this week, it showed that their investigators, in many cases, were woefully incompetent and negligent when it came to tax law.
Radke: So this new drive for regulation means more accuracy now?
Lazarus: Well in theory it does. The IRS says they will require registration and certain testing standards, which ideally’s going to bring all tax preparers up to a level, if not of a CPA then at least close. It’ll show that they understand the laws, they understand the terrain, and are qualified to do this work. But there are some serious loopholes here as well.
Radke: What are the loopholes?
Lazarus: Well, one of them is that many taxpayers might not realize that a number of tax returns are actually outsourced to places like India and elsewhere. Now under federal law, you need to be told in advance if your tax preparer or accountant is going to outsource. But many people might just sign the document and not really think about the ramifications. Well, some people think that these new regulations that the IRS are imposing will make the job of tax preparer more expensive in the United States, and thus increase the number of tax returns that are going abroad.
Radke: Have you followed any of these overseas preparations?
Lazarus: Actually, I spoke with an LA tax firm and asked them, did you ever try this? And they said, yeah, about a year or so ago we outsourced about 40 returns just as an experiment. We sent them to India, we wanted to see what would happen. They said, you know, mostly, technically, the returns were done well. But some of the clients, once they found out about this, hated the idea that their personal information was traveling abroad, and so they put the kabosh on it. When I said all right well, is this something you feel is going to be trustworthy in the future? This tax firm in LA said, not a chance — you cannot guarantee quality, you cannot guarantee privacy overseas. So if this is a growing trend, that’s something that our federal regulators need to watch for.
Radke: Los Angeles Times business columnist David Lazarus. Thank you.
Lazarus: Thank you.
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