IRS Expects to Register 1.2 Million Tax Preparers

From WebCPA.com:

The Internal Revenue Service anticipates that the number of individuals who will request Preparer Tax Identification Numbers will swell to 1.2 million after its new rules for registration of paid tax preparers go into effect at the end of the year.

The IRS recently announced proposed regulations imposing new user fees on individuals who apply for or renew their PTIN (see IRS Readies Tax Return Preparer Application System). In posting the proposed rules to the Federal Register, the IRS noted that the proposed regulations will require a tax return preparer who prepares all or substantially all of a return or a claim for a tax refund after Dec. 31, 2010, to have a PTIN.

Only attorneys, CPAs, enrolled agents and registered tax return preparers will be eligible to apply for a PTIN. The requirements to become a registered tax return preparer will be provided in future Circular 230 guidance. The IRS also plans to provide other guidance (including forms and instructions) on how to apply for a PTIN or other prescribed preparer identifying number, for the regular renewal of a PTIN or other prescribed preparer identifying number, and for the payment of a user fee.

Additional user fees related to the programs for regulating enrolled agents, enrolled retirement plan agents, and registered tax return preparers will be established in future regulations as those programs are implemented, the IRS noted. Future regulations will also address user fees associated with taking the registered tax return preparer examination and providing continuing education programs.

The user fee for taking a registered tax return preparer examination will recover the costs to the government for creating, administering and reviewing the examination. The user fee for providing continuing education programs will recover the costs to the government for the review, approval and oversight of continuing education providers to ensure their compliance with program requirements for continuing education programs. The vendor also will charge a reasonable fee to take the registered tax return preparer examination.

Congress Presses IRS to Ease Tax Preparer Regulations

Thirty-one members of the House of Representatives have reportedly signed a letter urging Treasury Secretary Geithner to ease up on tax preparer regulations. The members of Congress, including nine members of the tax-writing House Ways and Means Committee, are hoping to exempt non-signing tax preparers at CPA firms from registration requirements. They have also requested a delay in the IRS’ plans to launch a nationwide examination of tax preparers.

Web CPA reports:

The group, led by Brad Sherman, D-Calif., and Michael Conaway, R- Texas, said the IRS should modify its proposal. “We believe that the IRS has neither demonstrated the need for extending the non-signing preparer requirements to CPA firms nor that its proposed testing program merits shifting IRS resources away from other mission-critical programs,” they wrote. “We believe that any testing program should be deferred until the IRS has performed an adequate study to determine the level of return preparation problems caused by a lack of preparer competence and whether testing would have a meaningful effect on reducing those problems.”

The letter argues that requiring IRS registration of non-signing preparers who work for CPA firms is unnecessary because state boards of accountancy already regulate CPA firms and individual CPAs, and because the IRS would be able to monitor the quality of the CPA firms’ work through the preparer tax identification numbers of the CPAs who sign the tax returns.

The PTIN numbers will be assigned by the IRS when the CPAs register and will have to be included on all the tax returns they sign. The IRS has already excluded CPAs from the proposal’s examination and continuing professional education requirements because they are regulated by the state accountancy boards and Treasury Circular 230, the rules governing practice before the IRS, so there is “strong justification for not expanding the PTIN requirement beyond signing preparers in CPA firms with no adverse effect to the public.”

Read more here

10 Tax Preparers Plead Guilty of IRS Fraud

A scheme to file false tax returns yielded millions of IRS dollars before the tax return preparers involved were caught and convicted. Here’s the scoop:

In an elaborate scheme to file false returns, operators of two tax preparation businesses (Seguros Internacionales and Poz Servicios Para Hispanos) in North Carolina defrauded the IRS of about $13 million between 2006 and 2009. Within these three years, the ten preparers made approximately 10,000 filings of income tax returns that sought more than $22 million in refunds. The IRS paid approximately $13 million of the fraudulently claimed refunds before investigators caught on to the scheme! The two businesses are no longer in operation.

The preparers plead guilty to charges of mail fraud and illegal entry into the U.S. All of them are facing a lengthy prison term of anywhere between 5 and 20 years, and of course, will then be deported to their country of origin after they have served their jail term. It turns out, federal agents arrested even more people in connection with this tax scheme last week—all in all, it is believed that about 20 people were involved.

The IRS has made it clear they are increasing enforcement efforts and are working closely with the Justice Department to increase legal actions against dishonest tax return preparers. The IRS has used investigative measures such as having agents pose as taxpayers to seek out and stop dishonest preparers from filing inaccurate returns. The IRS claims to have conducted 230 undercover visits to various tax return preparers and as a result, dozens of search warrants have been issued.

The IRS is not messing around. The IRS warns it will continue civil and criminal action as appropriate. The increased efforts will ultimately make a difference for taxpayers nationwide and will help protect the many tax professionals who play by the rules.
In January, the IRS has proposed new regulations regarding the registration, testing and continuing education of tax return preparers. You can see the press release here:

Let me end by saying, it is not only the responsibility of the tax preparer but also a responsibility of the taxpayer to choose carefully when hiring a tax professional.

The full article, "10 Illegal Immigrants Plead Guilty of Tax Fraud” can be found here.

Latest Good Reads

Two Professors, an Angry Bear and Hate the Rich Syndrome

No 2009 Taxes From Some Lawmakers

Is It Any Wonder That the Tax Law is a Mess?

AMT and tax rates

Mistakes made when choosing a paid tax preparer

One Chicago Group’s Dynamic New Approach to Improving Women’s Advancement

IRS Tightens Rules on Tax Preparers

The IRS is starting the New Year out with a bang, with an announcement on Monday that they plan to roll out a series of new regulations on tax preparers. These changes will benefit taxpayers, as they IRS will begin targeting offices with high rates of erroneous returns. The Sac Bee posted a good article about how these changes will affect the tax preparation industry; you can find a clip of their story below.

With millions of Americans turning to paid tax preparers each year, the IRS marked the launch of the 2010 tax season Monday by announcing sweeping changes in how tax preparers conduct their business.

Among the new requirements: tax preparers must register with the IRS, undergo tax competency exams and annual education classes.

"Tax return preparers help Americans with one of their biggest financial transactions each year. It's vital we ensure all tax preparers are ethical," said IRS Commissioner Doug Shulman in a conference call with reporters.

Calling the new requirements a "monumental shift" in IRS tax strategy, Shulman said they're designed to protect consumers, alleviate fraud and bring in more tax revenue.

Latest Good Reads

Estate Tax: Why don't the Dems get it?

Revamping Philadelphia’s Tax System.

Have You Heard of Groupon?

The Responsibilities of a Tax Preparer.

A Tax Credit So Silly Even a Four-Year-Old Can Exploit It.

IRS Advisory Committee Issues Tax Administration Report.

The 25 Most Powerful Women in Banking.

Tax Preparer Review; Public Forums to Gather Input this Summer

According to their newest press release, the IRS will put together a series of public forums “at which individuals and representatives of diverse constituent groups will be able to provide input on the development of tax preparer performance standards.”

The public forums, a crucial part of an effort launched in June by IRS Commissioner Doug Shulman to help ensure tax preparers are qualified, ethical and provide a high level of service, will kick off on July 30 in Washington, D.C.

“These public meetings will be an important part of the dialogue as we move toward a set of comprehensive recommendations by the end of this year,” Shulman said. “We want an open discussion on how to strengthen the overall integrity of our tax system.”

Two panels are scheduled for a forum on July 30. The first panel will give consumer groups an opportunity to provide recommendations. These groups include the AARP, Consumer Federation of America, Center on Budget and Policy Priorities, National Community Tax Coalition and Low Income Tax Clinics.

The second panel will be made up of tax professional groups, including the American Institute of Certified Public Accountants, the National Association of Enrolled Agents, the National Association of Tax Professionals and the National Society of Accountants.

The two panels will take place at the Ronald Reagan Building amphitheater in Washington starting at 9 a.m. on July 30. People interested in attending should confirm attendance by sending an e-mail message to: CL.NPL.Communications@irs.gov.

After Busy Season, Accountants Get a Well-Deserved Tax Break

The Dallas news wrote up a great article on how those of us working in the tax industry get to finally take a sigh of relief, now that tax season is over. You can find a snippet of the post below, but the full story can be read here.

As we breathe a sigh of relief now that we finally filed our taxes, another group is also breathing easier:

The accountants and tax preparers who have worked all-nighters and weekends and skipped family functions to process the endless piles of tax returns.

For them, tax time is taxing.

Today, many are sleeping in, hung over or jetting off on vacation.

Before April 16, never ask accountants how they're doing, James A. Smith advises.

But today is a different story, a fresh start for tax preparers across the land who've scanned hundreds, if not thousands, of returns.

"You suddenly feel a little bit lighter," said Smith, a certified public accountant in Dallas. "Even though you're exhausted, you can breathe this big, deep breath and let it out there and let go of the stress and tension.

"You don't feel you weigh as much as you did five minutes ago."

Across the country, firms organize celebratory buffets, picnics and cocktail parties for their employees for a job well done and to mark the end of the so-called busy season.

Tax preparers polled by the National Association of Tax Professionals said they often take it easy for a couple of days after April 15.

One firm closes down at noon and employees rent a limo and go out for lunch. Many go on vacation, although one tax preparer said she takes a break before tax season so she can remember the beach when she's working late at night.

Last night, employees at Sibley & Co. in Dallas were planning to head out for hamburgers.

The firm will be closed today and Friday to help employees recover. They are "just flat tired," said Ken Sibley, the firm's founder. He's taking his wife to Florida for a week – and he plans to sleep on the plane.

"We have been working an average of 12 to 15 hours a day for six days a week and a lot more than I would want to on Sundays," Sibley said. "It's just been very, very intense."

During Tom Ochsenschlager's first tax season, a manager described the process as running an "intellectual marathon."

Top 10 Tips for Selecting a Tax Preparer

Choosing a tax preparer may seem like an easy task, but if you do not choose carefully, you could end up losing money. If you select an untrained preparer you could miss important deductions and credits, or, on the flip side, they could get you in trouble with the IRS by taking advantage of too many deductions. To assure you are making a smart choice, I have compiled the following list of tips to help you select a quality tax preparer.

1. False Guarantees

If a tax preparer promises you a big refund before looking at your financial information then you should go running the opposite direction! No one is guaranteed a refund, and if someone promises otherwise, they are probably going to do something unscrupulous. Use you best instincts to differentiate from real professionals and those trying to use black hat tricks to get leads.

2. Are They Current?

As you can imagine, you need a lot of training to become a tax preparer. Unfortunately it does not stop there. Each tax season bring a set of newly expired tax laws as well dozens of new deductions, credits, and regulations. Most tax preparers will enroll in some sort of update training before each tax season, but not all. Make sure your tax preparer is up to date on all tax policies.

3. Note Availability

It is always a good idea to check your tax preparers’ year-round availability before signing any papers. While some tax preparation offices are open all year (including Roni Deutch Tax Center® locations), others are open only during the tax season. While this may not seem like a nuisance, you must remember you should keep track of your taxes all year, and you never know when an important tax-related question or concern may come up.

4. Quality is Priceless

Do not jump for a tax specialist just because they are the cheapest. Although tax preparation can get a bit pricey, choosing a tax prep specialist just because they have low rates is not a good idea at all. Odds are, deciding on a slightly more expensive but more highly trained professional will probably end up making up for the difference anyway.

5. Above & Beyond

On top of having a year-round specialist, it is also good to have one who will go above and beyond just preparing your return. If the IRS sends you a notice or query, will your tax preparer be able to help you solve the problem or at least recommend you to someone who can? Whenever you are looking for a tax preparer, you always want to know what type of audit protection or assistance they provide.

6. Other Businesses

If you are a business or small business owner, having a business-tax-savvy preparer is a must. There are separate deductions, credits, and guidelines for business owners. In order to take advantage of every business deduction you can and prevent from breaking any rules, you need a highly trained tax professional to help you with these sorts of tax returns. When interviewing a potential prepare, ask if they have other business clients and see if you can get any reviews from said clients in advance.

7. E-File is a Must

With modern technology, there is no reason to hire a tax preparer that does not file electronically. It is both faster and more efficient. Perhaps the best advantages of filing electronically is that your return is likely to come much faster, and as soon as your preparer files it, you have proof that it has been filed.

8. Check Reviews

If your tax preparer is well established, it should be no problem finding at least a few reviews on their services online. You can also ask friends, family, neighbors, and coworkers who they chose to prepare their taxes. Some tax preparers even have a list of testimonials from previous clients available in their office or online.

9. Taxes Take Time

Unless you are filing a simple 1040 EZ, filing a tax return can be a long and strenuous process. If you are a small business owner and a tax preparer says they can get you in and out in 10 minutes, you probably are not getting the best service. It should take a couple of visits to get your taxes filed, depending on how much paperwork you have and how well you have kept track of everything throughout the year.

10. Questions Galore

Last but not least, your tax preparer should be eager and willing to know every financial aspect of your life. This means they will not only ask if you have children, but ask their ages, their education levels, whether they are your dependent, and so on. A good tax preparer will ask you dozens upon dozens of questions to get you the best quality of service, which you deserve.

New York Runs Sting To Nab Crooked Tax Preparers

Over the weekend, I came across this article on Ailbaba.com about crooked tax preparers in New York, and I wanted to make sure post about it here on my blog. It is very important to have strict laws and regulations in place so that everyone in the tax preparation industry is properly trained and in full compliance of all tax laws. I am glad to see New York is taking action to help ensure compliance. Below is a snippet from the article, but you can read the full version by clicking here.

New York State tax officials say they have uncovered evidence of significant fraud among professional tax-return preparers in a statewide sting operation in which undercover agents posed as clients.

Officials say they're startled not only by the unexpectedly large amounts of tax evasion they witnessed -- such as hiding taxable income and inflating deductions -- but also by the brazen nature of the cheating, which was caught on secret recordings. In one case, for example, a preparer told an undercover investigator: "I did not declare your full gross income from your business because you will pay a lot of taxes," according to a criminal complaint filed recently against a Queens, N.Y., preparer.

In another case, a tax preparer said he is going to report only $13,188 as taxable income, instead of the $131,884 the undercover agent had said was the correct amount, says an official at the New York Department of Taxation and Finance. Another preparer, referring to records given to him by the undercover agent, said: "This one and this one, I never saw this. It's going into the shredder."

Officials have already begun prosecuting some preparers on criminal charges, and they expect additional criminal prosecutions against other preparers -- as well as some clients, says William Comiskey, the tax department's deputy commissioner, office of tax enforcement. Officials will also be seeking civil fraud penalties against preparers. Mr. Comiskey says some preparers have agreed to cooperate and go undercover to show that their clients knew of the fraud and build evidence against those clients -- and, in some instances, against other preparers.

"They are cooperating against their former clients in other ways as well," such as sharing client lists and identifying fraudulent returns, Mr. Comiskey says. He says the state hasn't yet investigated tax-preparation chains, and that most of the preparers "were sole practitioners or were in small group practices."

Officials say they found evidence of fraud among about 40% of the 85 professional tax-return preparers they visited. If all the phony returns that were prepared had actually been filed, "it would have cost the federal, state and local governments approximately $4 million" in taxes, says Mr. Comiskey.