Personal finance

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As the Covid-19 pandemic set in, the federal government stepped up to provide Americans with unprecedented financial relief.

In order to access those funds, from stimulus checks to monthly child tax credit payments, most Americans had to file tax returns.

But submitting that paperwork could have put some individuals and families in a vulnerable spot, according to industry groups.

The reason: Professional tax preparers are not held to uniform standards.

More than half of all returns were completed by tax preparers in 2020, according to the National Association of Enrolled Agents. Almost two-thirds of those preparers are not regulated or required to meet basic competency standards.

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Now, some tax industry professionals ramping up their calls for Congress to pass a bill aimed at changing that in upcoming reconciliation legislation.

“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,” Kathy Pickering, chief tax officer at H&R Block said during a Tuesday webinar.

The bill, called the Taxpayer Protection and Preparer Proficiency Act, was reintroduced in June by Reps. Jimmy Panetta, D-Calif., and Tom Rice, R-S.C.

If enacted, it would give the U.S. Department of the Treasury the authority to regulate paid tax return preparers.

Those tax professionals would be on the hook to demonstrate they are able to prepare returns and process refunds. Additionally, they would have to fulfill continuing education requirements.

The bill would also give the IRS the authority to revoke a person’s Preparer Tax Identification Number, or PTIN, for fraudulence or incompetence.

The proposal would reinstitute a paid tax preparer regulatory program that the IRS put in place in 2011. That program ended following a lawsuit that challenged the agency’s authority over preparers.

“The problem that existed 10 years ago hasn’t gotten better,” said Roger Harris, president and COO of Padgett Business Services. If anything, it’s gotten worse as the tax code has become more complicated and the IRS has been forced to do more without more resources, he added.

“The time was probably right 10 years ago,” Harris said. “It’s certainly right today.”

To date, the latest version of the bill has few co-sponsors in the House. However, tax industry groups who support the measure are optimistic.

Americans need to know that they can trust the professionals that they’re working with.
Kathy Pickering
chief tax officer at H&R Block

“I think there’s a window here,” said Jeff Trinca, legislative counsel at the National Association of Enrolled Agents, of the reconciliation process.

One reason for that is the Joint Committee on Taxation estimates that the bill could help save money, he said.

“It’s very much tailor-made for something like reconciliation,” Trinca said.

Once the bill is passed, it could be implemented quickly, Pickering said.

In the meantime, it is up to taxpayers to do their own due diligence when working with a tax professional.

In addition to checking out a preparer’s website and social media profiles, taxpayers should double-check their professional credentials.

The website CPAverify.org can help verify a CPA designation. In addition, the State Board of Accountancy where the person is based can confirm whether their CPA license is still active.

Alternatively, you can email the IRS to inquire about the status of an enrolled agent at epp@irs.gov.

The IRS also offers a directory of professionals with PTIN numbers, which also includes information on other credentials they may have.

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