Some Tax Preparers Don't Add Up

If you are the IRS, are you better off or worse off for having the national chains in business? Is the error rate better or worse compared to self-prepared returns using the leading software? When the IRS eliminated Tele-file, they surely drove a certain non-trivial number of people into the hands of the paid preparers, what was that all about?

-Mark Bole

The issue is not National Chains, but the competency of tax preparers. From a research standpoint, they did not do a valid study. The sample was not random and the sample size is too small. The artice clearly recognized this: "The study by the Government Accountability Office was small -- only 19 returns, which the GAO cautioned cannot be used to generalize to the entire commercial return-preparation industry -- but on only two returns did the preparer produce what the agency determined was the right amount. And even those two had mistakes, though they did not affect the final tax amount."

It is my opinion (better yet hunch) that this exercise was done as a stalking horse for at a minimum registration and CPE requirements for "unenrolled preparers." Quite possibly for licensure by examination of now "unenrolled preparers." It may also be vaporware to rattle the cages of the national chains to negotiate something between my two hunches.

And then we read: "The GAO noted that several hundred thousand certified public accountants and lawyers are authorized to practice before the IRS and that another group of about 41,000, known as enrolled agents, must pass an examination or have worked for the IRS."

That reads to me like a so thinly veiled threat that it could be compared to putting a table napkin over your Glock.

A very important point on this that should not be overlooked. Very few States have examination/licensure for the preparation of State tax returns. In many States unlicensed accountants have a very strong lobby working to prevent this. If the Feds were to mandate this, many States may use this a leverage to initiate State licensure.

1. When logic and taxation converge, it was most likely the result of the Congress being asleep at the switch.
2. Applying logic to IRS decisions is an exercise in futility. Many of their decisions are simply adminstrative overkill and almost all are ladened with unforeseen consequences.

An "unenrolled preparer" could easily bypass any regulation or registration requirement by merely not signing the return. With all the tax preparation software in private taxpayer hands or accessible via the web, who would know the difference?

I think the law requires the preparer to sign the return, or at least most kinds of returns. So if the guy is ever caught, he could get in trouble for that alone. Stu

They will have already risked trouble by not registering. Signing the returns would possibly expose them to anyone who might check back on the signature. In prior years, my returns were done manually, so it was quite apparent that they were not done by a paid preparer. This year I used the free web TaxAct site, which provided a perfectly pristine professional appearing printed product (note the purposeful alliteration). There is no way to tell whether or not it was done by a paid preparer. And no way to find out other than by asking me -- which seems very unlikely. Bill

What if he doesn't claim to be a "preparer" but only an "advisor"? Sometimes he might just advise people on which forms to use, sometimes how to fill them out; at the extreme, he advises someone what to enter in every box on the form, but doesn't actually fill out a form. Seth

If he's paid for these services, he is still a paid preparer.

It's over! ChEAr$$$$, Harlan Lunsford, EA n LA

Look at the definitions of a paid preparer, I think they are in Circular 230. A paid preparer does not have to do the entire return. For example, if I prepare a tax return for a client but he has his company bookkeeper prepare a Schedule C which I include in the return, that bookkeeper can be a paid preparer! Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

I had people come to me a year or two ago who used a "paid preparer" who refused to sign their return, claiming they'd be "less likely to be audited" if he _didn't_ sign the return. Fortunately, they came to me for corroboration _before_ they mailed the thing in -- it was a total wreck of a return. So many things done wrong it wasn't even funny. And when I did it out correctly, they ended up owing less tax! So long as people want cheap, and will swallow claptrap like "you're less likely to get audited if I don't sign this", there will be charlatan return "preparers" who cheat people (and "help" people cheat, themselves, knowingly or not). Catherine