During preseason practices at a small college some years ago, I observed an unnerving phenomenon. Each morning at breakfast everyone would look around, taking a head count or otherwise attempt to figure out who was missing. Everyone knew that during the dead of night that something happened, people were somehow taken away – without a sound. The first signs were empty chairs at breakfast or an open space in front of a full locker. Rumor was, “The Phantom got ‘em.” At one time or another I suspect the Phantom approached everyone there, but with the end of pre-season, the risk of being “taken” became nothing more than a horrible memory.
While this is perhaps a strange start, it really does have current application. Today, any person may prepare a federal tax return for any other person for a fee. The actual number of tax return preparers is not known, but IRS estimates that there are between 900,000 and 1.2 million tax preparers. The Phantom is back!
Many preparers do not pass any competency requirements; have no minimum education, knowledge, training, or skill before they prepare a tax return for a fee. That’s all about to change.
Paid preparers will be required to register with the IRS. Not a bad idea, but consumers beware; make a good choice when selecting a preparer. In its own publication, the IRS said, “Additionally, registration will make it easier for the IRS to locate and review the returns prepared by a tax return preparer when instances of misconduct are detected.” Sounds like clients of a preparer with “instances of misconduct” are all subject to review by IRS. Click through to see the full IRS report.
Here is another requirement worth mentioning – testing. CPAs, attorneys, and enrolled agents are exempt from the competency testing program. While that fact might not surprise you, who do you think is responsible for establishing the testing program? Ok, that was easy. So, soon IRS will not allow a non-CPA, attorney or enrolled agent to prepare returns for a fee until after they have passed an IRS Test. (Note: Enrolled agents are trained and credentialed by IRS.) In the near future, it is possible that a great many preparers will handle your return just the way IRS would have prepared it – WOW! Good or bad, you decide!
As a part of its public awareness program, the Service wants consumers to know which preparers have met these new standards – a sort of blanket certification, as if all preparers are equal. In the May issue of the Journal of Accountancy, the AICPA (American Institute of Certified Public Accountants) was quoted as saying “… We do, however, have concerns about providing preparers who are not CPAs, attorneys or enrolled agents with a ‘certification’ based on limited qualifications, and we are particularly concerned with the examination process that may cause confusion among taxpayers regarding the relative qualifications of tax preparers.”
In addition to registration and passing a competency examination, preparers will also have continuing education requirements and must adhere to certain ethical standards. Suitability checks may include criminal background checks and tax compliance checks. Preparers will face new IRS enhanced preparer penalties, actions and injunctions. The Service has a stated objective of incorporating new enforcement tools including “visits” (Not like your Sunday visit to Grandma’s house I suspect!) to identify preparer noncompliance.
Beware; it is frightfully clear that the Phantom is back! In the face of new regulation, how many familiar faces will simply disappear? At least it will not be quite so scary for you, because now you know what happened to them.