U.S. tax preparer rules land in Congress, tough road ahead

WASHINGTON Mon Mar 17, 2014 7:16pm EDT

Signs at a H&R Block office are seen in Chicago April 14, 2009. REUTERS/John Gress

Signs at a H&R Block office are seen in Chicago April 14, 2009.

Credit: Reuters/John Gress

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WASHINGTON (Reuters) - An Obama administration push to clean up the tax preparation industry has landed in Congress where it is expected to stall, meaning further delays to rules to stamp out shoddy and deceptive tax preparers who are a drain on the U.S. Treasury and taxpayers.

After setbacks in the courts, the Obama administration this month asked Congress to pass a law that would specifically empower the Internal Revenue Service to regulate preparers, from sector leader H&R Block Inc to thousands of mom-and-pop shops.

The IRS had argued for years it did not need legislation to do this, but small-government activists recently prevailed in court in their effort to block the tax agency's attempts on its own to impose new regulations on up to 700,000 tax preparers.

Concurring with the activists, the U.S. Court of Appeals for the District of Columbia ruled last month that Congress never gave the IRS the power to impose test-taking and continuing education requirements on tax-return preparers.

The IRS now wants Congress to act, but there is little prospect that it will move quickly on that request, said Floyd Williams, the former IRS chief of legislative affairs. He is now a lawyer at a lobbying firm. "I don't think it's a go. I don't look for Congress to jump on that," he said.

The IRS request may have some traction in the Senate, where Democrat Ron Wyden, who chairs a committee that oversees the agency, has said he is "committed to focusing the committee on taking necessary actions to ensure robust taxpayer protection."

But in the Republican-controlled House of Representatives, the issue is not a top talking point among members of the tax-writing Ways and Means Committee, said a Republican staffer who asked not to be identified.

A spokeswoman for Ways and Means Committee Chairman Dave Camp, a Republican, said the IRS's request is under review.

Jeff Trinca, a lobbyist who represents enrolled agent tax preparers already licensed by the IRS, said, "Republicans are cautious ... There isn't a lot of grassroots support" for the IRS's proposed crackdown on the tax preparer industry.

NAVIGATING THE MAZE

The complex and confusing U.S. tax code each year drives millions of Americans to seek help with completing their tax returns, which supports a $9.4-billion industry.

About a third of the market is controlled by H&R Block, by far the industry's biggest firm, and three other sizable companies. The remaining two-thirds is divided among licensed and unlicensed preparers, many of them mom-and-pop operations.

Licensed preparers, such as enrolled agents, accountants and lawyers, would not have been subject to the IRS's proposed regulations, which were aimed mainly at unlicensed, unregulated tax preparers. That is the part of the market where the IRS sees the most mistakes and deception in tax returns.

Incompetent and unethical tax-return preparers "annually cost the taxpaying public billions of dollars," the Justice Department said in a court filing last year.

The department said in February it got permanent injunctions against more than 60 tax preparers in the prior 12 months.

Former IRS Commissioner Doug Shulman launched the agency's attempted crackdown in 2009, aiming to shrink the $450 billion "tax gap" between taxes owed to the IRS, but not paid.

Without federal action, regulation at the state level could help address the tax preparer problem, Williams said.

California is one of four states that regulate preparers. There tax preparers must pass a test and complete 20 hours of continuing education each year. But Cynthia Leachmoore, an enrolled agent in Soquel, California, said, "There's not enough consequence for someone who makes a bad mistake."

New York has moved recently to regulate preparers more closely, prompting complaints of a patchwork of state rules.

"My greatest fear is that states will each take regulations up on their own so that I would be unable to prepare a multi-state return," said Bill Nemeth, an enrolled agent in Georgia.

(Editing by Kevin Drawbaugh and Andrew Hay)

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Comments (1)
morbas wrote:
Citizens need to know the truth about government budgets — national, state and municipal.
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Federal plus state plus municipality is $6.03 trillion. The sum total of all personal income is $12.98 trillion. Thus, the governments are operating at 50% percent of total personal income.
It gets tougher…
The US dollar is the worlds transaction and main reserve currency. The world’s international debt securities is at $39Trillion US dollars. With a federal debt approaching 75% of U.S. gross domestic product, stability of the Green Back is a concern, will the USA government inflate out of the deficit?Now, fully 85% of foreign-exchange transactions do not use the Greenback (Wall Street Journal). The dollar reign as the standard for international debt securities is under assault as foreign interests flock to a currency exchange formula for ‘virtual’ stability.
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USA tax structure is the fault and an obstacle to worldly potential. Transaction tax code imposes disproportionate burden at the most fundamental rights of liberty, justice. Any encumbrance on sustenance is contrary to equality in the ’pursuit of happiness’. Debt and deficit is simply insufficient revenue. We can nationalize the tax code eliminating all other taxation, immediately balancing the budget(s), through a margin graduated income tax principle.

To: Office of Senator ____________________
United States Senate Washington,
D.C. 20510
To: Office of Representative_________________________
U.S. House of Representatives
Washington, DC 20515
We the people of this United States do proclaim this federal government ‘of, by and for the people’. That, in order to fairly distribute revenue burden, to satisfy ‘net income’ progressive taxation, to balance all governments budgets, and to not tax poverty;
The people mandate:
Income National Tax code that shall use margin graduated income tax principle: Margin $30k 0% single, $60K 0% joint, income above this a linear increasing rate {Income-[$30k or $60k])*(Income/$800k)*90%; 90% limit} . Exemptions shall be prohibited. The Federal Reserve shall amend the (90%) rate, and control currency printing mandated to maintaining currency availability and value. The Federal Reserve shall set the Margin rate value well (>2x) above highest of all State Poverty Level(s). Revenue shall be proportioned 1/3rd Federal,1/3rd State proportioned per cast ballot and 1/3rd Local proportioned per cast ballot.
This National Tax is a peoples tax, no other citizen taxation shall be permitted. Business shall not be taxed. The Federal Reserve shall control taxation. The people will by simple majority approve or reject all margin and rate changes at every Congressional House Representative election year ballot.

morbas(i)

Mar 17, 2014 9:52pm EDT  --  Report as abuse
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