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6 key areas of paid tax preparer regulation highlighted in AICPA letter to Congress

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By Dave Strausfeld, J.D.

The AICPA welcomed the Biden administration’s recent request for congressional legislation to give the IRS the authority to regulate paid tax preparers who are currently unregulated.

The Biden proposal, included in the recently released American Families Plan, requests Congress to pass legislation authorizing the IRS to regulate this group of paid tax preparers because “tax returns prepared by certain types of preparers have high error rates” and “[t]hese preparers charge taxpayers large fees while exposing them to costly audits.”

In a May 11 letter to congressional tax leaders, signed by AICPA President and CEO Barry Melancon and Tax Executive Committee Chair Christopher Hesse, the AICPA said that it “applauds the proposal” to take this regulatory step and stressed the importance of ensuring that tax preparers are “competent and ethical” and that the IRS “has the tools it needs to conduct appropriate oversight.”

Key elements needed for a preparer regulation plan

The AICPA’s letter to Congress said that the key elements needed for the American Families Plan proposal to regulate tax preparers are those found in a bill that Sen. Ron Wyden, D-Ore., introduced in 2019, known as the Taxpayer Protection and Preparer Proficiency Act, S. 1192 (116th Congress), with two additional elements added to “achieve balanced regulation.” These key elements from the Wyden bill are:

  • Reinstatement of the Registered Tax Return Preparer Program;
  • Limitation on the IRS’s authority to require a preparer tax identification number (PTIN);
  • IRS authorization to revoke PTINs; and
  • A GAO study on the IRS’s exchange of information with state taxing authorities.

The two additional elements suggested by the AICPA are:

  • An expression of congressional intent that the Registered Tax Return Preparer Program be focused on unlicensed preparers; and
  • Certain advertising requirements to mitigate marketplace confusion.

In closing, the letter states that taxpayers need and deserve enhanced compliance and elevated ethical conduct from their preparers and that the AICPA appreciates the need to address incompetent and unscrupulous tax return preparers. According to the AICPA, the protections in the Wyden bill, along with the two additional key elements, would accomplish those goals.

Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is a Tax Adviser senior editor.

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