AICPA outlines key points for paid preparer regulation legislation

By Dave Strausfeld, J.D.

Editor: Paul Bonner

The AICPA welcomed President Joe Biden's administration's request for congressional legislation to give the IRS the authority to regulate paid tax preparers who are currently unregulated.

Biden's proposal was included in a White House fact sheet describing his American Families Plan (available at www.whitehouse.gov) and soon thereafter incorporated into the administration's fiscal 2022 budget requests to Congress and Treasury's accompanying General Explanations of the Administration's Fiscal Year 2022 Revenue Proposals ("Greenbook," available at home.treasury.gov; also see "Budget and Greenbook Detail Biden's Tax Proposals," also in this issue). The fact sheet asked Congress to pass legislation authorizing the IRS to regulate this group of paid tax preparers because "tax returns prepared by certain types of preparers have high error rates" and "[t]hese preparers charge taxpayers large fees while exposing them to costly audits."

In a May 11 letter to congressional tax leaders, signed by AICPA President and CEO Barry Melancon and Tax Executive Committee Chair Christopher Hesse, the AICPA said that it "applauds the proposal" to take this regulatory step and stressed the importance of ensuring that tax preparers are "competent and ethical" and that the IRS "has the tools it needs to conduct appropriate oversight." The letter also stated that taxpayers need and deserve enhanced compliance and elevated ethical conduct from their preparers and that the AICPA appreciates the need to address incompetent and unscrupulous tax return preparers.

The letter detailed key elements for regulating tax preparers from a bill that Sen. Ron Wyden, D-Ore., introduced in 2019, known as the Taxpayer Protection and Preparer Proficiency Act, S. 1192 (116th Congress), with two more elements added to "achieve balanced regulation." These key elements from the Wyden bill are:

  • Reinstatement of the Registered Tax Return Preparer Program;
  • Limitation on the IRS's authority to require a preparer tax identification number (PTIN);
  • IRS authorization to revoke PTINs; and
  • A study by the U.S. Government Accountability Office of the IRS's exchange of information with state taxing authorities.

The two additional elements suggested by the AICPA are:

  • An expression of congressional intent that the Registered Tax Return Preparer Program be focused on unlicensed preparers; and
  • Certain advertising requirements to mitigate marketplace confusion.
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