Taxpayer Protection

Today TaxMama wants to tell you about something really important and exciting. IRS’s first announcement of the year made a big splash. IRS proposes new registration, testing and continuing education of tax return preparers. What does this mean to you? And why is this exciting?

For the last several years, the Taxpayer Advocate, Nina Olson has been on the warpath about the absolute lack of licensing and oversight of tax preparers in the United States. You already know that at least 46 or 47 states have no licensing requirements or minimum standards established for tax professionals, at all!

This means someone can open up an office in Florida, or Nebraska with no education whatsoever and start collecting money from you to prepare your tax return. He doesn’t have to know anything about tax laws. And so he doesn’t follow them. These offices tend to open up for tax season; prepare a few thousand quickie, bogus tax returns, generating unreasonably high refunds; collect several hundred thousand dollars (or more) – then be gone when the IRS and state error letters or audit invitations arrive.

IRS has not been unaware of this. Commissioner Doug Shulman has stepped up investigations and criminal actions against these folks. But he’s also been gathering information and ideas on how to regulate the tax preparer community. After extensive research and hearings, Commissioner Shulman has outlined a plan to protect taxpayers like you.

You can read the overview of the plan here – at TaxQuip #1446 . In the Resource Box, you will find a link to the entire 54 page report.

What does this mean to the tax pro community? We’re all breathing a sigh of relief that taxpayers will finally have some solid protection. However, within those 46 or 47 states without licensing, are thousands of experienced, ethical tax professionals who will now have to face testing. For them, even if their tax education is always up-to-date, testing is a scary process. And it’s worse! Those who prepare both personal and business returns will have to face two exams. Let’s face it, some people who may be brilliant and accomplished simply freeze up at tests. Have pity on these folks.

The good news for those tax pros is, it won’t happen this year. Take a deep breath. Perhaps in 2011, certainly by 2012, IRS will establish the testing process and contract with a provider. Appendix I of the report outlines what the testing will cover. By the time IRS sets up their testing, TaxMama’s EA Exam Review Course will have a course to help you pass.

Meanwhile, it’s tax season. Let’s get back to work, business as usual – at least for the ethical preparers. The con artists? Watch out. IRS will be visiting you this tax season!

And remember, you can find answers to all kinds of questions about taxpayer protections, tax professional behavior and other tax issues, free. Where? Where else? At

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