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IRS sets standards for tax preparers

New rules, which start next year, may help weed out the crooks.

By Jeff Schnepper Jan 18, 2010 11:28AM

Yippie! They’re from the government and they’re really gonna help you.


The IRS is now requiring all federal tax return preparers to register with the agency and get a preparer identification number. IRS agents plan to set up sting operationsto weed out the bad preparers.


The new rules will require preparers to pass competency tests and take 15 hours of annual continuing professional education.


Sorry, no grandfathering for current preparers. But attorneys, CPAs and enrolled agents (EAs) who are already subject to oversight by existing professional organizations are exempt.


It’s about time. Actually, it’s past time. As reports:

Each year, hundreds of criminal investigations are initiated against preparers by revenue agents and the U.S. Department of Justice. In 2009, 124 people were sentenced to an average jail time of 18 months.

These new rules won’t apply to the current 2010 tax season. Hopefully, the IRS will implement them in time for 2011. I have to admit, I’m less than confident.


This is an organization that has struggled, unsuccessfully, to upgrade its computer system since 1985. So far, we’ve moved from having to remove a second shoe to abacus level. Just last month, the IRS got an “F” from the Treasury inspector general for tax administration upon reviewing the IRS Business Systems Modernization program.


I’m all for the new program.


There’s much too much incompetence out there. Frankly, with Congress changing the rules each year, I’m not surprised. Requiring continuing education should minimize the “completely wrong and lost but absolutely certain about the answer” preparers.



I once had a client who was devastated by an IRS audit of a tax return I didn’t prepare. The client had a home office, and the preparer had deducted the full original cost of the house.


My favorite deduction on the return was the “bubble medical expense.” Since the taxpayer lived in New Jersey, a state with pollution, the preparer deducted the projected cost of what it would cost to keep the client in a bubble of pure air.


The preparer actually wrote that on the return.


I regret not being a fly on the wall when the preparer argued for it during the audit.


At least in court we were able to eliminate the penalties. Appeals recognized that no knowledgeable taxpayer could intentionally claim such deductions.


Now it’s time to eliminate the crooks. The new IRS registration program will help.


In the meantime, if you know a crooked tax preparer, call 1-800-829-0433 and file Form 211.


You may even get a reward.


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