Every few years, law makers try to pass a bill either increasing or regulating the number of licensed tax preparers in the country. A new law is being proposed in congress, one that would increase the IRS ability to license tax preparers. Is all of this regulation necessary? And does it benefit you in any way?
Why Lawmakers Are Trying To Pass The Bill Again
The main reason that laws like this get proposed is the high number of people who file tax returns with an unlicensed preparer. According to the Internal Revenue Service, less than half of all submitted returns are prepared by licensed and regulated preparers. And those who did report with these unregulated preparers often fell victim to some form of tax crime.
That much tax crime results in a lot of time spent in court, dealing with concerns that may have been accidental. It also results in cases like the unlicensed preparer in Florida who committed $22 million dollars in tax fraud.
Why Some Tax Preparers Are Fighting Against It
While many tax preparers are fine with regulation, many unlicensed preparers are fighting against it. For example, in 2012, three tax preparers filed suit against the IRS and claimed that their proposed regulations would cause serious repercussions in the tax industry, including
- The closing of small-scale tax businesses
- Increases business costs
- Higher rates
- Loss of businesses
These preparers were actually successful in their case. And even when the IRS introduced a voluntary education program in 2014, many objected that the program was just an attempt to bypass the previous ruling and force more people to get licensed.
What It Could Mean For You
The biggest risk you're likely to run into when using an unlicensed tax preparer is accidental fraud. Although unlicensed tax preparers aren't necessarily going to make mistakes, there is still a chance that they might make a serious mistake that the IRS will take very seriously. And even if the preparer is the one who made the mistake, you are the one who will be considered at fault.
How serious are the penalties for tax crime? People who are found guilty of evading or defeating tax can be imprisoned up to five years and may receive fines as high as $250,000. They can also suffer similar penalties for not paying, file returns, or make fraud statements.
If the government increases the number of licensed tax preparers, you're less likely to run into these problems. However, there's a good chance the increased amount of licensing and licensing fees could lead you to pay more money for preparation.
Whether the government passes this legislation or not, it's worth understanding the importance of finding a licensed tax preparer. And if this legislation fails, there's a good chance a similar piece might come up soon. So make sure you find a fully licensed tax preparation in your area: finding someone you can trust will help you avoid a sudden increase in fees or accidental tax fraud.