New IRS Tax Preparer Initiative Welcomed by Mixed Reactions

Internal Revenue Service Commissioner John Koskinen unveiled the agency’s plan to create a voluntary tax preparer certification program.

The lower court and the appellate court in Loving V. Commissioner ruled that the IRS did not have the authority to regulate preparers. However, the IRS remained undeterred in its quest to regulate tax preparers despite criticism from many in the industry.

For the 2014 tax season, tax preparers were required to have a preparer tax identification number (PTIN) but were not required to test or continue in their educational requirements. In much the same way, the new Registered Tax Return Preparer (RTRP) designation lost its relevance.

Commissioner Koskinen announced the plan on June 26, 2014 via teleconference alongside Carol A. Campbell from the IRS Return Preparer Office (RPO).

Koskinen acknowledged that while the majority of taxpayers use a paid tax preparer due to the complexity of the Tax Code, about 60% operate without regulation or oversight and that “although many of them do a good job, we have found that others are poorly equipped to assist taxpayers in preparing returns.”

In an attempt to combat this lack of oversight, the IRS is launching what it’s decided to name the Annual Filing Season Program which will be both voluntary and temporary. Although Commissioner Koskinen is hoping that Congress will enact a proposal in the President’s Fiscal Year 2015 Budget that will require the IRS mandatory oversight of return preparers.

The Commissioner gave the following details:

“A preparer who wanted to participate would have to be registered with the IRS and have a valid Preparer Tax Identification Number, or PTIN. Under the program, preparers who sign up agree to take 18 hours of continuing education each year. That includes 10 hours on federal tax law topics, two hours on ethics, and a six-hour tax filing season refresher course. The refresher course includes a comprehension test of 100 questions.

If you complete the course work and pass the test, you would receive a record of completion that would be good for the filing season. You would also have a limited right to represent your clients before the IRS on issues pertaining to the returns you prepared for them. To keep your qualification and practice rights current, you would have to take the courses and pass the test each year.”

The announcement was met with mixed results in the tax professional community. H&R Block, the largest tax preparation company in the nation, immediately offered its support, referring to the program as “essential for protecting consumers,” while veteran tax preparer Bob Flach resisted the program saying it is “one of the stupidest things I have ever come across!” Flach believes the initiative “merely puts the name of qualifying participants on a large and confusing list and issues a certificate to hang in the office – is of no real value to either the public or the industry.”

While attempting to battle incompetent and unethical tax preparers, many professionals in the industry wonder if the IRS’ latest move will only add to the already complex market.

Source: Phillips, Kelly, “IRS Announces New Tax Preparer Program to Mixed Reactions,” Forbes, July 27th, 2014