Underscoring IRS authority for paid-prep rules
When a U.S. District Court judge set-aside IRS regulations of commercial tax preparers in January, he said the agency lacks the statutory authority to impose such rules.
Many policy experts and organizations respectfully disagree, including NCTC. We long have believed the IRS has the proper legal standing – not to mention the fundamental responsibility – to develop and enforce rules to protect taxpayers from fraud or incompetence at the hands of paid tax preparers. And we continue to maintain that.
Nonetheless, the process of appealing the district-court decision could take a great deal of time, and its outcome is uncertain. So, we welcome such proposals as the “Taxpayer Protection and Preparer Fraud Prevention Act” (H.R.1570), filed last month by U.S. Rep. Cedric Richmond of Louisiana.
This bill would make clearer the IRS’ authority to regulate commercial preparers, and to require that they demonstrate “good character,” “good reputation,” “necessary qualifications,” and “competency to perform the functions of a tax-return preparer.”
In introducing his legislation, Congressman Richmond called it necessary to ensure working families don’t fall victim to abuse by unscrupulous preparers. NCTC joined the National Consumer Law Center in cataloging many such examples of abuse in a court brief they filed last month, in support of the IRS’ appeal.
If court proceedings ultimately fail to reinstate the paid-prep rules – or if federal policymakers determine legislation is the preferred route to take – it will only underscore the importance of proposals like Rep. Richmond’s.
Bottom line: We’ll continue our consumer-protection efforts to ensure paid, for-profit preparers face at least basic professional scrutiny – much as has long been the case for the nonprofit, volunteer tax preparers who provide well-regulated, IRS-certified services for struggling taxpayers through the VITA program.
Attorneys, CPAs, and Enrolled Agents who prepare taxes already are subject to their own professional regulation and licensing standards, and thus would be unaffected by the IRS rules or H.R.1570.