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Congress Receives Bills To Regulate Tax Preparers

by Mike Godfrey, Tax-News.com, Washington

03 December 2015


Two Republican members of the House of Representatives Ways and Means Committee have introduced a bill that attempts to ensure that US tax return preparers adhere to minimum standards, while a wider bill introduced by both Senate and House Democrats includes a provision giving the Internal Revenue Service (IRS) the ability to regulate tax preparers.

In the wake of a ruling against the IRS's attempts to regulate tax preparers, which had been said to be an overreach of the agency's statutory power by the US courts in February last year, the IRS introduced a voluntary Annual Filing Season Program (AFSP) for the 2015 filing season.

Certification is offered to unenrolled preparers who complete a required amount of continuing education, receive a Record of Completion and are included in an IRS website database. However, the voluntary AFSP remains the subject of legal challenges, particularly from the American Institute of Certified Public Accountants.

On December 1, Diane Black (R – Tennessee) and Pat Meehan (R – Pennsylvania) introduced the Tax Return Preparer Competency Act into the House. The legislation would make it compulsory for professional tax return preparers to undergo necessary examinations, take annual continuing education classes, and to submit to a background check. It would also specifically authorize the IRS to set up a public database of tax preparers.

Black and Meehan noted that "tax preparer fraud raises particular concerns for the earned income tax credit (EITC). A Treasury Inspector General for Tax Administration report found that the IRS may have issued more than US15bn billion in improper EITC payments in 2013 alone. The National Taxpayer Advocate estimated that more than 76 percent of preparers who prepared returns claiming the EITC did not have a professional credential."

"As a result of our mammoth tax code, an estimated 80m Americans turn to tax preparers to assist in filing their yearly returns," Black added. "Today, however, there are no minimum standards to stipulate who can charge for these services. This lack of accountability puts Americans at unnecessary risk and contributes to rampant improper payments within the tax system. … We must act now to rid out fraud and protect taxpayers from fly-by-night tax preparers who lack a basic background check and the requisite training to handle Americans' most sensitive information."

On the other hand, the Taxpayer Rights Act of 2015, introduced in both the Senate and the House by Ben Cardin (D Maryland), a member of the Senate Finance Committee, and Xavier Becerra (D – California), the House Democratic Caucus Chairman and a member of the House Ways and Means Committee, goes further by providing the Treasury Department and the IRS with the authority to regulate all aspects of Federal tax practice, including paid tax return preparers.

The Taxpayer Rights Act aims "to improve Internal Revenue Service (IRS) services and procedures and to protect the rights of all US taxpayers." In addition to strengthening programs and other rules related to the preparation of tax returns, it would codify 10 primary taxpayer rights, improve IRS lien and levy procedures, and enhance the ability of the National Taxpayer Advocate to aid and protect taxpayers.

The Act would provide additional protections for taxpayers before the IRS can file a Notice of Federal Tax lien (NFTL), while a taxpayer would also have the right to receive notice and be given an opportunity to appeal an NFTL filing. Under current law, tax liens can appear on a consumer credit report for up to seven years after the tax owed has been paid, but the Act would reduce the period to at most two years.

"Americans of all income levels deserve to know their basic rights as taxpayers and that the federal government, including the IRS, is protecting those rights," Cardin concluded. "Our current tax system is complicated and the Taxpayer Rights Act will ensure that US households with modest means have access to quality return preparation, along with the same knowledge and protection of their rights as other US households."

TAGS: court | compliance | tax | tax compliance | training | law | tax credits | Internal Revenue Service (IRS) | enforcement | tax authority | education | legislation | United States | standards | services | Tax

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