Wednesday, October 20, 2010

The IRS and the Latest Licensing Outrage

Most people care not one farthing about the IRS' new licensing procedures, and rightly so, but in the tax preparation industry, it's a big thing. Dan Alban does some heavy olifting in making the point for those few of us who are opposed to what amounts to be a tax increase aimed solely at tax preparers:
Who would you rather prepare your taxes? A professional tax return preparer with over a dozen years experience in preparing tax returns for taxpayers without incident. Or me, an attorney who has never so much as taken a law school class or continuing legal education course in tax law, and gave up on doing his own taxes last year once he started needing to itemize his deductions. You probably think you’d prefer the first option, but the IRS says you’re wrong.

The IRS already has procedures in place to pursue those incompetent or dishonest tax preparers - get called in for a questionable deduction or credit and you'll roll over pretty quick on your tax preparer, won't you? - so there's no need for more licensing. And it already maintains a database of registered attorney, CPAs, and Enrolled Agents that nothing for those preparers required to be registered. No, the new rules not only take in these professionals but others, like those Alban refers to, as well as every single staff member in a firm who decides which information is entered onto a return. Oh, and at $65 a licensing pop. And they'll have to take a test, too. And Continuing Education to maintain their registration.

Now, will my staff be responsible for any errors on a return they prepare for my signature? Heck, no! And well they shouldn't. I'm the one who signs off on the return so I'm responsible for making sure the information is accurate and takes reasonable advantage of the tax laws.

The IRS needs this, it says, because it's receiving a lot of fraudulent tax returns prepared by unscrupulous preparers. How does the IRS know this? Because they already track this information! They already know who these preparers are! They don't need additional licensing to nab these no-gooders. This is a naked power grab, pure and simple, signed off by major firms like H&R Block to keep the mom-and-pop tax return preparation shops - places where many taxpayers go to have their returns prepared for a cheaper fee than I can prepare them. And let's not talk about the ethics of giving an agency the power to decide who can represent taxpayers in their convoluted administrative processes.

And it's clear the IRS hasn't thought all of this through. The IRS has disclosed its current staff of 19 which processes licensing requests under the old laws is already overwhelmed. The $65 licensing fee is necessary to pay for additional staff and resources to process of what has been estimated to be millions of requests for licensing under the new rules, as well as the renewal requests and administration of tests and continuing education each year.

Wait a minute. Maybe the IRS has thought all of this through. It's a whole new bureaucratic nightmare it can preside over, full of managers and district and regional managers who must be supervised by even higher management and, well, you get the idea. Oh, and managing the new Health Care law is on the way, too. So it looks like things are looking up for the IRS.

And, as usual, it's the taxpayer who'll come up short.

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