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Newly proposed IRS rules would help the Service track incompetent tax preparers. That sounds like a good thing, and it is, but Orange County tax lawyers are noting that if implemented as proposed, the new rules would be too much of a good thing.

The proposed IRS rules would require all paid tax-return preparers to register for a “preparer tax identification number” (PTIN). The registration would allow the IRS to track the preparers’ work and find them when problems are discovered.

Tax attorneys, certified public accountants (CPAs) and enrolled agents already are subject to extensive oversight and testing at both the state and federal levels. However, there are many tax preparers who have little or no supervision and may not have any formal training. No one protects taxpayers from unprepared tax preparers.

Having a registration program would bring unregulated preparers within reach of the IRS, enabling it to identify those with a pattern of shoddy work, and, if necessary, act to protect taxpayers. That’s the good news.


The problem is that the program as proposed goes beyond the “signing preparer” (the person who directs and reviews the work and then signs the return) to essentially everyone who plays any part in the preparation of the return.

Millions of people may need to be registered, at great taxpayer expense, without any real benefit to taxpayers.

The IRS also plans a competency exam for all preparers. But this also goes too far by testing preparers who are already closely supervised and regulated, such as CPAs.

Some experts point out that the minimal competency tests might mislead taxpayers into believing all preparers who pass the test are equally qualified.

Many experts believe that tracking only the signed preparers, at least to begin with, would satisfy the IRS’s goals of rooting out incompetent preparers.

Source: Wall Street Journal “The IRS Targets Incompetent Tax Preparers” 8/26/2010