Saturday, June 13, 2009

The IRS Plan to Close the Tax Gap

I mentioned the "tax gap" yesterday so it might be good to tell you a little of what that is. It's the difference between taxes actually paid and taxes that oughtta be paid. I don't know where the number stands but it's huge. Heck, tt's always huge, trust me. If it weren't, the IRS would have no reason to be.

Each year, then, the IRS rolls out its plan to close that gap. Most of the time the plan is a rehash of the plans before it: increase enforcement, upgrade computers, reach out to taxpayers, be kinder and gentler or be more forceful and cruel. It depends on which way the pendulum swings. The IRS take its plans to Congress and Congress funds those plans, giving them little more than the year before, or maybe a little less - it may be an election year, after all - and the IRS goes about its business.

This year, besides the mind-blowing scheme to tax your employer-provided cell phone usage, the IRS has come up what it thinks is another brilliant idea: register all tax preparers.
Internal Revenue Commissioner Doug Shulman announced on June 4, 2009, in congressional testimony before the House Ways and Means Oversight Committee that the Internal Revenue Service plans to make recommendations by the end of the year to ensure that tax preparers adhere to high ethical standards. At the hearing on the tax filing season and 2010 IRS budget, Commissioner Shulman said the IRS has to ensure “all preparers are ethical, provide good service and are qualified.” The announcement follows IRS National Taxpayer Advocate Nina E. Olson’s recommendations to Congress over the past several years that a registration program needs to be created for unlicensed tax return preparers.

Yes, that's what the problem is. Unscrupulous tax return preparer's are draining the government's coffers dry. Crack down on them and Congress will be using $100 dollar bills to light cigars.


It's the usual fish-in-a-barrel approach for the IRS. They'd rather spend their resources on taxpayers who are in compliance and picking apart the returns they've voluntarily filed than go after the non-files and cash-only economy that, though expensive to hunt down, would increase the confidence of the public of the mission of the IRS.

The press-release from the OSCPA at the link above makes the argument for me about the tools already in the hands of the IRS to regulate tax return preparers so I won't make them here. Let's just say it's overkill on the IRS' part. A move to seem like they're moving to do something when they aren't. No other agency has the authority it does to regulate, and punish, the advocates that represent customers the IRS serves. And make no mistake, the IRS serves taxpayers and not the other way around.

I'm registered of course - I'm a CPA and before that, I was an Enrolled Agent - but that registration alone doesn't make me a darn good tax return preparer. And I'm scrupulous not because I'm registered, either, but because that's the kind of guy I am and, besides, the market demands it. Most taxpayers seek out good, honest tax return preparers and good, honest tax preparers seek out clients to prepare tax returns for.

Sounds like commerce to me. Nothing wrong with that.

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