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It's Back To "Tax Payer, Beware!"
Beginning August, 2011, the IRS required those who filed tax returns for a fee to pass an exam, register with the IRS and show 15 hours annual continuing education in the field. The program was challenged in court and overturned. Tax payer, beware!
In other words, while your hair-dresser needed a license to cut and style your hair, your "tax guy" did not. Tax preparers other than attorneys, CPAs, enrolled agents or enrolled actuaries were not required to demonstrate any degree of knowledge of the tax code nor any proficiency within the field of tax preparation and filing of returns.
The registration and regulation program was challenged in U.S. District Court and subsequently overturned. The case hinged on whether these unregulated tax preparers were "practicing before the IRS". And, because of the "self assessment" nature of tax filing, it was determined that these tax preparers were nothing like the attorneys, CPAs, enrolled agents and enrolled actuaries who do, in fact, practice before the IRS. Thus, they were not subject to IRS regulation.
What does it mean for the industry as a whole? What does that mean to the tax payer?
For the industry, it means that competition in the tax preparation field is once again open to the unregulated tax preparer. Persons without financial investment in and without financial liability related to their service typically charge less for that service. Attorneys, CPAs and others may find themselves cutting their rates and fees in order to compete.
For the tax payer, it means there could be unregulated tax preparers out there offering tax preparation and filing services at lower rates. Considering that the vast majority of tax scams and tax frauds are perpatrated by unregulated tax preparers, it means that you, as tax payer, must beware.
"The cost has to be weighed together with the result. What do you get for your money? If your CPA can offer you significant savings in tax liability, the CPA is the more cost effective option. Many tax payers don't realize that."
And what of the potential for scams and fraud? "That," said Partridge, "is why you should get references. In the end, each of us is responsible for our own tax return. With the potential for fraud and misdeed, for which the individual is responsible, the risk is real. If you don't have complete faith in the person preparing your tax return, find someone you do trust".