Proposal to Increase IRS Oversight of Tax Preparers

May 10, 2021 | Blog

Many tax attorneys are keeping their eye on the Biden administration’s proposal to increase the Internal Revenue Service budget, giving it more resources to catch tax cheats while reducing the number of audits completed on a regular basis. According to Biden’s American Families Plan, these two goals can be met by allowing the IRS to have more oversight of tax preparers, who are largely unregulated.

The White House cites a high number of errors in returns prepared by certain kinds of tax preparers, and some believe that these preparers collect fluffed-up fees from taxpayers while simultaneously exposing them to expensive tax audits. The Biden Administration has stated that because such professionals play a vital role in the tax filing process, such as helping numerous filers claim the new credits available, they should also be subject to IRS oversight. President Biden has called upon Congress to put forth bipartisan legislation that would give that authority to the IRS.

 

Our tax lawyers in San Francisco have learned that the U.S. Department of the Treasury has stated in its own American Families Plan that filers frequently use unregulated tax preparers, and that the latter often lack the ability to give tax assistance that is error-free and precise. According to the U.S. Department of the Treasury, preparers who fall into this category complete and submit more returns than all other types of preparers combined, including professionals who specialize in tax problems and tax attorneys. In the past, unregulated preparers have subjected their clients to expensive mistakes leading to audits. Some have even been caught defrauding taxpayers intentionally for their own gain.

President Biden’s Plan Would Expand IRS Authority

Biden’s plan calls for expanding the authority of the IRS to create safeguards in the tax preparation industry. It would include heftier penalties for deceitful or unscrupulous tax preparers who do not identify themselves on the filers’ returns, such as “ghost preparers,” as they are often called, and preparers who would otherwise defraud honest, tax-paying filers.

Fortunately, there are many honest tax professionals, IRS tax attorneys, and CPAs who are dedicated to assisting their clients with returns and ensuring that they get the most of their legitimate tax breaks without using any shady practices to get them more than they’re entitled to.

Sadly, the bad apples in the bunch create tax problems for members of the profession who are aboveboard and reputable. It also causes problems for the IRS and the U.S. Department of the Treasury when some people get away with cheating.

IRS office

A Long-Term, IRS Regulatory Goal May Be Achievable Under the Biden Administration

Regulating tax preparers has been attempted in the past with little success, as most states have their own rules and regulations regarding this process. However, the courts have stated that if Capitol Hill gives the IRS the okay to regulate the industry, then oversight may finally be written into law at the federal level.

Certain Congress members propose bills every so often that would give the IRS oversight authority, but in almost all cases they have stalled due to pushback from numerous tax professionals and their representative trade organizations. In addition, because the IRS’s prime targets would be independent preparers, there was significant pushback from that group as well.

Because the legislative process for the American Families Plan has only recently begun, it will take some time before we know exactly how it is going to play out. However, tax preparer regulation is merely one of several pro-IRS measures the new administration has begun trying to put in place. Taxpayers in need of tax advice or who have concerns about a return should seek the services of a qualified tax attorney at their earliest convenience.