Is Your Tax Preparer Competent?
By Ric Edelman
New IRS exam will help in verifying it.
The tax law is so complicated these days that only an expert can prepare a return properly.
Small wonder, then, that we encourage our clients to hire a professional tax preparer. But two government studies have raised concerns that many preparers aren’t competent. In the first, the Treasury Inspector General for Tax Administration sent auditors posing as taxpayers to 28 tax return preparers — a dozen who worked at chains and 16 employed by small, independent firms. Of those 28 returns, 17 preparers failed to calculate the correct amount of tax or refund due. In the other study, the U.S. Government Accountability Office found that only two of 19 preparers at chain outlets correctly calculated the tax liability or refund amounts. That’s a 90% failure rate.
In response, the IRS is clamping down. The agency has introduced a competency test for the hundreds of thousands of people who earn money preparing tax returns, and starting this year these folks will be required to complete 15 hours of continuing education annually. All will be required to renew their Preparer Tax Identification Number on an annual basis, and some will be fingerprinted. Attorneys, CPAs and Enrolled Agents are exempt, as are some tax preparers they supervise. The IRS urges you to make sure your preparer is registered and signs your returns. The agency also plans to offer, at IRS.gov, a list of preparers at who have registered and passed the test.
We’d prefer that Congress simplify the tax law so that hiring a professional tax preparer is unnecessary. But until it does, the IRS’ efforts are most welcome.