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The Daily

President Backs Tax Preparer Regulation in Proposed Budget

Chris Gaetano
Published Date:
Feb 10, 2016
MoneyMagnifyPresident Barack Obama included increased oversight of tax return preparers in his 2017 budget proposal, according to the Treasury Department, putting additional weight behind existing efforts to put the industry under the IRS's regulatory authority. 
"Paid return preparers have an important role in tax administration because they assist taxpayers in complying with their obligations under the tax laws. Incompetent and dishonest tax return preparers increase collection costs, reduce revenues, disadvantage taxpayers by potentially subjecting them to penalties and interest as a result of incorrect returns, and undermine confidence in the tax system," says the Treasury Department's Greenbook. 
The IRS previously tried to regulate paid tax return preparers in 2011, when it launched a new oversight program. The service required that all paid return preparers (with the exception of CPAs, attorneys and enrolled agents) register with the government, pass a competency test, and thereafter complete 72 hours of continuing professional education every three years. Preparers were also required to follow certain ethical and professional standards. 
However, in 2012 a lawsuit argued that the IRS had no legal authority to implement this program, a conclusion with which a federal court and then an appellate court concurred. This ultimately led the service to shutter the program. Later, the IRS tried to launch a new program that was the same as the old one, except it was voluntary--registrants would get a certificate in exchange for following its requirements. However, this led the AICPA to sue the IRS, saying that this new program, while nominally optional, would become de facto mandatory due to market pressures. The suit accused the program of being a clever end run around the court's decision. 
The proposal, however, would make all these points moot, as it would give the IRS the very legal authority the courts said it lacked. If passed, the regulation would be able to proceed as it had been doing before the lawsuit. The Treasury Department said this measure would become effective the date the budget is enacted.