Dasmah Accounting

Do We Need the IRS to Regulate Preparers?

Posted on March 26, 2010

The IRS Commissioner Douglas Shulman has stated he has “twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.”  The IRS will announce this year its recommendations for regulating the preparer industry.  So do we need the IRS to regulate preparers, or is the status quo sufficient?

A tax preparer needs to be able to prepare all types of returns to achieve a level of success in their business.   However,  there are a couple of things that have changed this industry that have dramtically impacted it and I’d like to point out one of them.

The tax software has allowed routine math calculations, tax table lookups, depreciation schedules and even complex tax issues to be performed automatically.  This has led some business owners to  believe that if you can input data, you can prepare taxes, and having a higher level of knowledge about tax law is no longer needed.  The “skill” is knowing how to use tax sofware (and electronic filing).  Believe it or not, not all CPA’s or attorney’s have the ability to prepare all types of tax returns.  Sometimes there maybe an item on a return that is not fully understood and instead of spending the time to find the answer, they assume if the software said so, it must be correct.

Over 24 million taxpayers qualify for the EITC (Electronic Filing and the Earned Income Credit), with over $48 billion in credits claimed.  The perception by some taxpayers is this refundable credit is “free” money (and it is free to them).  Demand was created for a preparer who could get the taxpayer the maximum amount of money back, as quickly as possible.  This new class of preparer isn’t interested in preparing schedule C’s or corporate returns.  They specialize in simple, quick returns.

Now the IRS expects the preparer to assist them in ensuring the compliance and verifying the information and representations made by taxpayers on their returns.  The IRS intends to regulate and enforce Due Diligence. 

Both the high-end preparer and the simple return preparer have members who have been guilty of nonethical behavior and this has created a problem for us all.

Dasmah follows the IRS guidelines to become more accountable to them by:

1.  Obtaining the using our PTIN (Preparer Tax Indentification Number) on all our tax forms we’ve prepared.

2.  Continuing education is a requirement of ours and adheres to the IRS regulations.

3.  Dasmah complies with the ethics rules of Circular 230.

We know that our clients place a tremendous amount of trust in us to give them the best tax counsel.  We don’t just take shortcuts and try to find loopholes but we try to find real tax savings opportunities while limiting the clients exposure to the IRS.   

No industry is perfect and human error is always there;  having said that Dasmah is confident in stating that by in large we are truely focused on professional compentency and in serving our clients to the fullest is our primary focus. 

So no matter what your answer is to the question on whether or not the IRS should regulate the preparers or keep things as is; dasmah has been and will continue to stay sharp and guide ourselves with the highest of ethics for our clients and for ourselves.

By Rachel Larsen