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More Tax Preparer Regulations on the Horizon?

In recent years, the IRS has been trying to cut down on the amount of fraudulent tax returns. Notably, in 2012, the IRS attempted to require all paid federal tax return preparers to complete registration, competency testing and continuing education. Last spring, it was ruled, and upheld in appeals, that the IRS lacked statutory authority to impose these regulations.

After the IRS was limited in its plan to regulate paid preparers, it implemented a voluntary program called the “Annual Filing Season Program” in 2014. The IRS tried to incentivize preparers by included those who complete the program in their directory of federal tax return preparers (along with CPAs, EAs and other designations). However, some in Congress believe the IRS should have the power it desires to implement regulations over paid tax preparers and are attempting to pass legislation that allows for increased authority. It is too early to tell what kind of support this will generate in Congress, but it could be a catalyst for change in the future.

I think it is clear that something needs to be done to try to prevent fraudulent reporting by paid preparers. However, it may be difficult for the IRS (even if granted more authority) to regulate preparers while dealing with budget cuts and less agents. The IRS would need an expanded budget and workforce to enforce regulations of this magnitude and that does not seem likely in the near future.


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