Senators get behind IRS preparer regulation power grab. Accounting Today reports:
Two Democrats on the Senate Finance Committee have introduced legislation to regulate paid tax preparers in response to the federal court decision that found the Internal Revenue Service had exceeded its statutory authority in regulating preparers.
Senate Finance Committee ranking member Ron Wyden, D-Ore., and Senator Ben Cardin, D-Md., unveiled legislation Thursday that provides the Treasury Department and the IRS explicit authority to regulate paid tax return preparers. Wyden chaired the committee until control of the Senate changed after last November’s elections.
They call their yet unnumbered bill the “Taxpayer Protection and Preparer Proficiency Act of 2015.” A better name would be “A Bill to Boost the Revenue of the Major Franchise Tax Preparation Outfits.”
Whatever idealistic motives might be behind this bill (though I don’t give senators the benefit of the doubt for a second), the effect will be to protect and enhance the market share of the national tax prep firms. It was no coincidence that the overturned IRS preparer regulation program was drafted by a former H&R Block executive who came out the other side of the revolving door as a Treasury employee.
Regulation always favors the big. The national firms can spread the costs of compliance over a much bigger base of work, while a sole practitioner has to be her own regulation compliance department. A paperwork hangup or computer burp in the preparer regulation database can wreck a year’s business for a sole practitioner, but wouldn’t stop H&R Block or Liberty Tax for a moment.
It is argued that such regulation is needed to protect us from incompetents by imposing a “competency test.” As the test administered under the abortive IRS regulation program was more a literacy test than a competency test, this is hard to credit. And anybody who has practiced in a regulated profession like accounting or law knows that while you can make someone pass a test, you can’t make him competent.
The list of bills introduced this week in Congress in today’s Tax Notes shows what the real tax prep problem is: Congresscritters like Senator Wyden. In addition to his preparer bill, the Senator introduced a bill:
To amend the Internal Revenue Code of 1986 to provide a tax incentive to individuals teaching in elementary and secondary schools located in rural or high unemployment areas and to individuals who achieve certification from the National Board for Professional Teaching Standards, and for other purposes.
This is just one more example of legislators using the tax law as the Swiss Army Knife of public policy. As the knife gets more unwieldy with every new gadget added to it, the tax law gets a little less better at collecting revenue with every new program added to it. Picture a Swiss Army Knife the size of a railcar.
And it’s not like Congress isn’t already doing enough for the national tax prep outfits, as Megan McArdle explains in Latest Tax Season Headache? Obamacare:
There’s been a lot of talk about the “hidden taxes” in the Affordable Care Act, but here’s one I hadn’t thought of before or seen mentioned anywhere: the sudden need for folks with simple tax returns to avail themselves of the services of a paid professional. If you have no income outside a modest salary, and not much in the way of potential deductions such as huge mortgage interest or state tax bills, then there was really no reason to use a tax preparer. Even the mathematically challenged should, with the aid of a calculator, be able to fill out their 1040EZ forms just fine. But Obamacare has introduced a significant level of complexity into the taxes of lower-middle-class wage earners.
That’s true. And a lot of folks who have used preparers will find their costs going up to pay for the extra work that will be required.
Kay Bell, IRS contacts tax preparers about filing mistakes; Thousands warned of Schedule C business income & child tax credit errors. Funny, I thought preparers weren’t regulated at all.
Jason Dinesen, The IRS’s Preparer Directory Will Be Bad News for Enrolled Agents. EAs have less lobbying clout than CPAs or the national tax prep outfits, and it shows.
Paul Neiffer, Should I File By March 1? “Therefore, if your tax for 2013 was very low and your tax for this year will be very high, talk this over with your tax advisor to see if it makes sense to pay an estimated tax payment on January 15 and wait until April 15 to make the final payment.”
Remember, only farmers get this break, and many are finding that the need to wait on K-1s from other investments makes filing a correct March 1 return impossible.
William Perez, Tips for a Tax-Efficient Divorce, Plus a List of What to Do First. From what I’ve seen, it’s even more tax-efficient to stay married.
In spite of the cold, we can count on Robert D. Flach for a fresh Friday Buzz roundup of news from around the tax blog world.
Tim Worstall, Tax Avoidance And Tax Evasion Are To The Benefit Of Us All, picking up on David Henderson’s post that we mentioned earlier this week:
The crucial point is really how one views the activities of government. And there’s two views that seem to be held. One that I regard as hopelessly naive and simplistic, the second something very much closer to reality. That first is that all of the things that government does for us are beneficial to us and that limiting what it does do harms us all. The second is that some parts of what government does are things which both must be done and can only be done by government, but that a rather large part of what it attempts to do shouldn’t be done at all, whether by government or not.
I think this point is correct, though I’m sure Jim Maule would disagree with vigor. I also agree with this point that he quotes: “Government maximizes revenues; it does not levy revenues only to produce genuine public goods.” I also believe tax avoidance and evasion can serve as a check on overreach, but I suspect it only works in pretty bad situations.
Renu Zaretsky, Taxes: To Be Considered, Rejected, or Collected. Today’s TaxVox headline roundup covers the upcoming federal budget proposal, Cadillac taxes on health plans, and an “impossible dream” bill that purports to both abolish the imcome tax and balance the budget.
Cara Griffith, Mississippi Needs a Dose of Transparency (Tax Analysts Blog). “The Mississippi Department of Revenue does not publish opinions and decisions resulting from its audit appeals process, even though it may use those opinions and decisions as precedent.”
I notice Iowa hasn’t published any new rulings in two months now.
Liz Malm, Taxplainer: The State and Local Tax Impact of the Keystone Pipeline. “According to the analysis, property taxes collected during construction would amount to just under $4 million and would be spread out over seven counties in the three impacted states. ”
Sebastian Johnson, State Rundown 1/8: All Eyes on the Governors (Tax Justice Blog)
Career Corner. Make the Best of Busy Season, You Big Babies (Amber Setter, Going Concern)