Financial Regulatory Forum

U.S. IRS proposes tax preparer regulations

By Reuters Staff
January 4, 2010

By Kim Dixon

WASHINGTON, Jan 4 (Reuters) – The U.S. tax agency will propose new rules to regulate paid tax preparers, including mandatory registration with the government and competency testing for those not already subject to professional exams.

With more than 80 percent of Americans using a tax preparer or software to complete their tax returns, the new rules are aimed at boosting standards within a fragmented industry and increasing revenue to the government, Internal Revenue Service Commissioner Doug Shulman said in a statement on Monday.

“It’s critical to taxpayers and it’s also critical to the revenues of the country,” Shulman said in a briefing with reporters.

Companies including H&R Block and Jackson Hewitt may also be required to pay new fees under the plan.

Under current law, anyone can prepare a tax return for a fee, with virtually no standards.

In a 55-page report, the IRS spells out new regulations it intends to issue including mandating preparers to sign returns and to register with the IRS with a Social Security number or a preparer tax identification number.

Several of the proposals, including the competency exam, exempt attorneys and certified public accountants, which are already subject to their own professional exams.

The IRS also proposes to beef up enforcement against misconduct by tax preparers, including allowing the agency to suspend delinquent advisers.

H&R Block could benefit under any boost in oversight as it is already held to a higher standard as the biggest nationwide tax company, Wall Street analysts have said.

The preparer community is diverse and includes some entities that operate under federal guidelines only if they are called in for questioning by the IRS or have to appear before the agency for another reason. These include so-called enrolled agents, certified public accountants and lawyers.

The report also noted that quality control over the tax software sector is largely conducted by industry itself, but did not make any new recommendations for regulations. It will set up a task force to look at potential standards for the industry.

Intuit Inc owns Turbo Tax, the most popular tax preparation software.

“There is quite a bit of commercial pressure for software to work,” Shulman said. “We didn’t find major problems with the

accuracy.”

(Reporting by Kim Dixon; Editing by Tim Dobbyn and Matthew

Lewis)

((kim.dixon@thomsonreuters.com; + 1 202 354-5864; Reuters

Messaging: kim.dixon.reuters.com@reuters.net))

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