Tax Preparation Licensing

What’s the difference between a hair stylist and a tax preparer? Every state requires hair stylists to be licensed, but most states let anyone call him or herself a tax preparer. Sound a little frightening? You bet it is. Because here’s the bottom line: taxpayers are ultimately responsible for their tax returns, not the person who prepared them.

Now, this is not the case in every state. California and Oregon have strict licensing requirements for anyone charging money for tax preparation. And you know what the IRS found? When people in Oregon are audited, their tax returns require far less adjustments than taxpayers in states without licensing requirements. Meaning, Oregonians’ tax returns are more accurate. The IRS attributes this to higher quality tax preparation.

If you are not 100% sure you can do your taxes correctly, finding a qualified professional is paramount to keeping compliant with tax laws. A simple mistake here and there can cause big trouble since the IRS heavily penalizes many “simple mistakes.” And unlike other service industries, if your tax preparer makes mistakes, or is downright dishonest on your return, they are not held accountable. Instead the taxpayer is on the hook for every penalty, fine, and any interest assessed.

Sounds a little ridiculous, right? Well, I agree. And so does the IRS, evidently. The IRS announced plans to introduce tax preparer regulations to President Obama. And I am thrilled the IRS is finally stepping up to help protect taxpayers from unlicensed preparers. While these new regulations are only in the planning stages right now, I would like to throw my unabashed support behind them.

Filing your taxes is probably the most important financial transaction you make every year. These new regulations would ensure every single taxpayer would receive competent tax preparation.