IRS WATCHDOG PROVIDES CONGRESS WITH MID-YEAR REPORT AMID ALLEGATIONS OF BAD IRS PRACTICES

Author’s Note:  This post explains why we advocate that taxpayers select a professional tax practitioner who is either a CPA, attorney or Enrolled Agent.  If you don’t,  you may end up the victim of fraud and the problems attached to it.

Timing is everything, and the National Taxpayer Advocate Service (an independent *watchdog* group within the IRS ) just presented its mid-year report to Congress revisiting its 2002 Congressional recommendation to authorize the IRS to establish *minimum standards* for tax return preparers.

Because Congress failed to act for 8 years, in 2010 the IRS started to implement its own *preparer standards*, but unfortunately, earlier this year, a U.S. Court of Appeals for the District of Columbia affirmed a lower courts decision that the IRS exceeded its rulemaking authority in acting without a statutory grant of authority.  In other words, the courts stopped the IRS from having the ability to test or evaluate the competency of tax preparers because it didn’t have Congressional authority, and Congress refuses to give the IRS the authority to ensure a level of competency.

Author note:  This is absurd.  In the same mid-year report, the Taxpayer Advocate Service (TAS) once again addressed the issue of tax preparer fraud.  While the writing focused on the failure of the IRS to compensate the victims of tax preparer fraud – but it made no connection that it might have something to do with the fact that Congress and the IRS are not even establishing a minimum standard (of competency) for tax preparers.  

It goes on to to say, “The report argues that minimum standards for return preparers are important to protect the taxpayers from incompetent or unscrupulous preparers.  More than 140 million taxpayers file returns each year, and over half use return preparers.  It stresses that currently there are no standards for hanging out a shingle and … there is considerable evidence that many preparers lack the knowledge and ability to prepare accurate returns.  

Who is being hurt most by this?   Low income taxpayers!  The report further states that more than 10 million taxpayers who claim the Earned Income Tax Credit (EITC) – use UNREGULATED preparers.  “Because these taxpayers are low income – they often turn to pawn shops, used car dealers and check-cashing outlets for return preparation assistance.” Olsen wrote, “we will continue to subject these low income taxpayers to the actions of incompetent or unscrupulous preparers and we will unlikely to make progress in reducing the EITC noncompliance rate to an acceptable level, thus harming the public fisc”(i.e., treasury).

Therefore the IRS announced that since they lack the authority to continue its mandatory credentialing program — it will implement a voluntary program for the 2015 filing season.

In conclusion, TAS continues to advocate for the IRS to have the authority to develop a MINIMUM COMPETENCY EXAM.

Source: IRS Newswire, Issue IR-2014-78.