IRS Set to Enforce New Regulations
The IRS is planning to regulate the thousands of tax preparing firms that help American taxpayers fill in their income tax returns. Surprisingly, for one of the largest financial transactions that takes place every year, there has been no regulatory system that governs it. Major tax preparation firms like H&R Block Inc and Jackson Hewitt Tax Services have been serving the American tax community for many years as have a myriad of smaller mom and pop establishments that provide the same service.
This planned regulation will not affect your taxes filed this year but is due to take effect starting in 2011 and will take several years to implement nationwide. Under the proposed regulation, tax preparation firms will have to register themselves with the IRS and are given 3 years to ensure their tax preparers pass an examination to ensure their competency. Each tax return they prepare will be given a unique registration number. This move is part of the government's efforts to regulate many financial sectors such as credit cards, hedge funds and derivatives.
The regulations apply to those who actually sign the forms. This may be a loophole that could be exploited by preparers who work under a supervisor. But these regulations do not apply to those like CPA firms that already come under their own professional regulatory body; neither does it apply to volunteer tax preparers who work at free tax clinics. At this point of time, the regulations also do not apply to tax preparation software.
The primary objective of these regulations is to enforce stricter control over smaller firms who portray themselves ‘tax preparers' or ‘tax consultants'. The Better Business Bureau received 147 complaints against these firms and ranked them 120 out of about 3,800 industry categories in 2006. In 2008, the number of complaints rose to 2,276 and the rankings slid to 80. Not surprisingly, government auditors working undercover who frequented these firms found gross errors and inaccuracies in their work.
To the consumer, this step by the government could mean higher fees to prepare their tax returns if the various firms have to incur additional costs to follow the regulations. But it should make it easier to identify the more professional tax preparation firms as the IRS will maintain a database of those who have met the requirements of registration and passed the examination.
The IRS is mulling over the move to regulate loans given by these tax preparation firms to taxpayers who are expected to receive refunds. At present about 60% of taxpayers use tax preparation services.
Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.
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