Tax Preparer Regulation Gaining Momentum Again
Even since the Registered Tax Return Preparer Legislation was overturned in 2013 and replaced with a voluntary AFSP Program is has been thought the IRS may again attempt to regulate tax return preparers to reduce tax return errors and fraud that costs the government and taxpayers billions of dollars each year in incorrect returns.
The Taxpayer Protection and Preparer Proficiency Act was introduced to Congress this past June by Reps. Jimmy Panetta, D-Calif., and Tom Rice, R-S.C. and would change the current IRS requirements.
The bill would reinstate 2011 requirements that require an initial competency exam and at least 15 hours of continuing education.
What Is The Taxpayer Protection and Preparer Proficiency Act?
This bill would regulate paid tax return preparers and would give the U.S. Department of the Treasury the authority to require continuing education. Currently the only education program the IRS has for tax preparers is voluntary and know as the Annual Filing Season Program (AFSP).
The AFSP includes a 15-hour continuing education course for Exempt Status Tax Preparers, or an 18-hour continuing education course for Non-Exempt Status Tax Preparers.
The AFSP courses are currently optional, although recommended by the IRS.
If it does pass, tax preparers would also be required to demonstrate competence when it comes to preparing returns and processing refunds.
If they are unable to meet the requirements, they risk losing their Preparer’s Tax Identification Number (PTIN).
Supporters of the bill include the American Institute of CPAs, the National Association of Enrolled Agents and the National Association of Tax Professionals
Why Is The Taxpayer Protection and Preparer Proficiency Act Needed?
More than half of all tax returns were handled by tax preparers in 2020. However, two-thirds of those preparers are currently not regulated or required to meet any basic competency standards.
A lot of tax industry professionals believe that professional tax preparers should be held to uniform standards and are pushing for the Act to pass. Without regulations in place, Americans are left to do their own due diligence when choosing a tax professional to work with.
They’ve chosen now as the time to speak up as COVID-19 has brought with it a plethora of new scams.
Chief tax officer at H&R Block, Kathy Pickering, said, “The pandemic has catalyzed a new wave of fraud and scams and Americans need to know that they can trust the professionals that they’re working with.”
Padgett Business Services president and CEO Roger Harris is supportive of the legislation, saying, “The Tax Code is growing ever more complicated, which produces more situations where fraud can take place.
That should lead to an IRS that has more resources to teach taxpayers and provide enforcement, but the IRS is severely undermanned. This has resulted in a lot of burden falling on preparers, and we allow half of them to not show basic competency.”
How Did We Get Here?
In 2011, the RTRP along with mandatory continuing education was required by law. The District Court overturned in 2012 when a lawsuit was brought by independent preparers.
The ruling challenged the authority of the IRS to regulate tax preparers and the IRS was deemed to not have the authority to regulate tax return preparers without additional legislation.
This bill would give the IRS the authority it needs to reinstate the education requirements. The goal of the new proposed legislation is to minimize fraud and reduce errors, creating a certain level of qualification amongst tax preparers.
Once passed, the legislation could be implemented quickly.
Why It's a Good Idea To Complete The AFSP Now
It's always been good idea to keep current on the new tax laws and many preparers already participate in the Annual Filing Season Program (AFSP) and already complete 15 or 18 hours of continuing education so the impacts would be minimal.
One of the easiest ways for a Tax Preparers to set themselves apart from their competition is to participate in the Annual Filing Season Program (AFSP).
The AFSP includes a 15-hour continuing education course for Exempt Status Tax Preparers, or an 18-hour continuing education course for Non-Exempt Status Tax Preparers.
The AFSP courses are currently optional, although recommended by the IRS. But the Taxpayer Protection and Preparer Proficiency Act was reintroduced to Congress this past June by Reps. Jimmy Panetta, D-Calif., and Tom Rice, R-S.C. and would change the current IRS requirements.
What Enrolling In the AFSP Can Do For You
Whether or not the Taxpayer Protection and Preparer Proficiency Act passes or not, Tax Preparers can reap major benefits by enrolling in the AFSP. Some of the best ones being:
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Clients Representation Rights
- When you take Annual Filing Season Program you will get limited representation rights, meaning you can represent clients whose returns you prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service.
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IRS Record of Completion
- Once you complete the AFSP program you will get an official Certificate of completion from the IRS. This allows you to easily prove to your clients that you are a qualified tax professional.
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Extra Credibility
- Participating in the IRS Annual Filing Season Program (AFSP) will allow you to prove that you are a qualified tax professional. This way you can set yourself apart from your competitors and have the means to prove that you are a qualified tax preparer.
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Stand Out From Your Competition
- Taking the IRS AFSP Course will allow you to appear in the IRS public database when taxpayers search for qualified tax preparers within the Directory of Federal Tax Return Preparers. This is a great way to earn more trust and credibility from your clients.
What You Should Do Now In Preparation
The best way to stay on top of current trends and requirements is to sign up for the AFSP.
The AFSP includes Federal Tax Law Topics, Federal Tax Law Updates, Ethics, and an Annual Federal Tax Refresher.
Completion of the program comes with a Record of Completion from the IRS, allowing a preparer to prove to their clients that they are a qualified professional.
The deadline to complete courses to participate in the 2022 Annual Filing Season Program 2022 year is December 31st.
Since it may become a requirement again and it's always a good idea to keep up with the ever changing tax laws your best bet is to sign up now and get ahead. That way in the event that the Taxpayer Protection and Preparer Proficiency Act is passed you are already in compliance and prepared.
Enroll for the AFSP now before the deadline so you are participating in the AFSP for 2022 so if and when this legislation passes you already ahead of the game and your competition
