| WASHINGTON, March 17
WASHINGTON, March 17 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
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