Bay Area Estate And Tax Planning Law Firm

Court rejects IRS attempt to regulate tax preparers

On Behalf of | Feb 19, 2014 | Uncategorized |

A federal court recently struck down an Internal Revenue Service proposal that the agency be permitted to oversee professional tax preparers. The concept was fought by tax preparers from several states as well as libertarian groups who believed it was an overreach of government intervention in business.

This issue has many implications beyond the burden on tax professionals, since taxpayers put their trust in tax preparers to help them not only get the best possible tax rate but to help them avoid audits or criminal prosecution for inaccurate tax returns.

On that level, regulating tax preparers makes sense at first, since in many other areas where there are serious risks to consumers, states require licensure. For example, when our home needs re-wiring most consumers feel more at ease hiring a licensed electrician who has been vetted by the government, rather than allowing a friend or relative who has had experience with electrical wiring do the job. This is because we assume (often rightfully so) that a licensed professional is subject to meaningful oversight that will prevent our newly re-wired home from catching fire. However, in the case of California’s licensure law, it seems that there was no improvement in accuracy of tax returns.

In the specific case of inaccurate tax returns, the implications for average taxpayers looking for assistance are significant since that label might act as a promise of competency for those trying to choose a method of tax preparation. However, no tax preparation method is completely fool proof and there are many situations in which taxpayers must resolve disputes with the IRS over even the most carefully attended tax returns.

Source: Forbes, “Appellate Court To IRS: You’ve Lost That Loving Tax Case (Again),” Kelly Phillips Erb, Feb. 12, 2014.