The proposed Taxpayer Service Standards legislation before the U.S. House and U.S. Senate will protect Americans from tax return preparers who do not meet basic standards of competency, training or ethics. Consumer groups have banded together to urge the Senate Committee on Finance and the House Ways & Means Committee to support S. 1192/H.R. 3330 and H.R. 3466 to protect American taxpayers who unknowingly may be using unqualified or dishonest tax preparers.
According to the IRS, nearly 60% of taxpayers seek help with their taxes from paid preparers. As important as a tax return is, there are actually no basic standards in place to protect taxpayers from incompetent, unethical or sloppy tax preparation services. Yet the consequences of a mistaken tax return can be devastating.
In 2014, the GAO found widespread and significant errors during a “secret shopper” test on paid preparers, with only about 10 percent of preparers calculating the correct refund amount. The Federal Trade Commission ranked tax preparer fraud in the top 30 most common types of fraud in 2017. And yet, the IRS has had little authority to prevent bad actors from becoming tax preparers or remove them once they’re in the system.
Currently, the only requirement to become a paid tax preparer is to obtain a Preparer Tax Identification Number (PTIN) from the IRS.
Tax Preparers Need No Credentials
Robert McKinley, Senior Analyst for CardTrak, CardData and CardFlash, recalls the old joke if you had a phone and a heartbeat you could qualify for a store credit card. Today, the requirements to drive for Uber and Lyft include a car, insurance and a clean driving record, are far more onerous then obtaining a PTIN and calling yourself a tax expert.
The IRS identified nearly 20,000 registered preparers who were potentially non-compliant with their tax filing and payment obligations, with $375 million in taxes due from these preparers as of January 26, 2015.
As of May 2017, however, only about 1,700 of 1.3 million PTINs issued had been revoked – 0.001%. Even today, the IRS accepts returns from preparers with expired or invalid PTINs. What’s more, 58% of active PTIN holders have no professional credentials at all, unlike CPAs, attorneys and enrolled agents.
House & Senate Legislation Details
H.R. 3466, introduced by Congressman Estes (R-KS) and Congresswoman Sewell (D-AL). This bill would give the IRS the authority to revoke PTINs from fraudulent, incompetent and unethical preparers.
S. 1192 and H.R. 3330, the Taxpayer Protection and Preparer Proficiency Act. These Senate and House companion bills, introduced by Senators Wyden and Cardin and Congressmen Panetta (D-CA) and Yoho (R-FL), respectively, would establish minimum standards for tax return preparers.
The letter was sent to the House and Senate by the Center on Budget and Policy Priorities; Consumer Action; MANA – A National Latina Organization; Maryland Consumer Rights Coalition; National Consumers League; Prosperity Now; and Virginia Citizens Consumer Council.