The days of just anyone becoming a tax return preparer and playing havoc with the rules, as some have, seem to be winding down.
The courts, for one, are now taking fairly strong action against tax return preparers who actively assist clients in tax evasion schemes. See, e.g., US v. Sommerstedt et al, 106 AFTR2d 2010-5403 (DC NV 2010), available with other case materials on justia.com, here. A tax return preparer who was permanently enjoyined from acting as a return preparer or promoting tax evasion schemes had been required to notify clients of the injunction against him and to file a certification that he had done so. He filed for relief from notification and certification, claiming that it violated his Fifth Amendment rights. The court rejected that claim, indicating that he was not being ordered to make a testimonial statement but merely inform clients of an injunction against him that was a matter of public record. Until he files, he'll be fined $1000 a day for contempt of court. That should mean that the preparer's days of profiting from promoting tax evasion are over.
Similarly, the IRS Is moving ahead with the oversight rules for requiring "preparer tax identification numbers" (PTINs) for all preparers on federal returns starting Jan. 1. The rules cover anyone who is paid to prepare all or substantially all of a return or claim for refund. 125,000 notification letters are slated to go out weekly for the next eight weeks to remind preparers who already have PTINs that they will be required to sign up under the new system. The new PTIN sign-up application, with a fee of $64.25 due, is available through www.IRS.gov/taxpros. See IR-2010-106 and the PTIN page and Overview for more information. (By the way, for taxpayers with concerns about how to choose a tax preparer, the IRS provides a "tipsheet" that may be of interest and also provides information on "complaints against tax professionals".)
There has been the typical clamor about burdensome new regulations connected with the new PTIN, testing and registration requirements. See, e.g., AICPA VP testimony at IRS hearing on changes needed, Oct. 8, 2010 (comments on the proposed regulations, in particular objecting to registration and testing for nonsigning staff of CPA firms and student interns); VSCPA expressing concerns regarding IRS proposal to regulate paid income tax return preparers, Virginia Soc. of CPAs, July 10, 2010; ; Members of Congress Ask Treasury to Modify Return Preparer Registration Plans, J. of Acc'tancy, Aug. 11, 2010 (indicating, surprisingly, that some congressmen don't think the need for testing has been demonstrated). Some of these concerns do call for practical remedies--testing and registration for student interns, for example, could well be difficult. Some appear to reflect typical knee-jerk reactions to any new regulation that can be claimed to be burdensome--in particular, the congressional letter questioning the need for testing seems highly questionable, since there are demonstrable problems with lack of competency. For some evidence of the type of errors committed, see "Top Errors for Taxpayers and Paid Preparers on Return Submissions" at the IRS website.
The IRS has responded to various of these complaints in different ways. Rev. Proc. 2010-41 provides some relief for foreign tax preparers and those without a Social Security number vecause of conscientious religious objections. At an AICPA fall meeting, Commissioner Shulman announced that there would likely be "some relief for testing and continuing education requirements for people who do not sign a return and work in a professional firm under the supervision of an accountant, enrolled agent or lawyer." Text of AICPA keynote address. To address further concerns about the new requirements, Commissioner Shulman announced today the creation of an IRS Return Preparer Office to have "broad responsibility" over the initiative, with David R. Williams as head. Download Shulman ann. of Williams to head tax return preparer office.102610.
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