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IRS tightens tax pro regs

By Kay Bell ·
Tuesday, July 26, 2011
Posted: 8 am ET

Electricians are licensed. So are plumbers. Even my hairdresser has to get an official piece of paper from the State of Texas before she can cut hair for a living.

But in most states, it doesn't take any formal OK for folks to hang out a shingle declaring they are tax professionals.

The Internal Revenue Service is trying to change that. But it's a slow process.

Last year, the IRS began a new national tax preparer oversight program. Anyone who is hired to file returns must now get a Preparer Tax Identification Number, or PTIN, and when required to do so, sign their names and include their PTINs on returns and refund claims they are paid to prepare.

In 2011, however, approximately 100,000 paid preparers completed returns without being properly registered. The IRS has sent those tax pros letters regarding the oversight.

"The vast majority of federal tax return preparers complied with the rules," said IRS Commissioner Doug Shulman in announcing the IRS follow-up mailing. Around 712,000 paid preparers followed the IRS rules and obtained new identification numbers.

The IRS letters to those who didn't, said Shulman, will "provide additional information so they can register as soon as possible. We owe it to the compliant tax preparers to make sure that everyone is on a level playing field."

Next, the tax agency is going after "ghost preparers." These are individuals who don't sign returns they prepare.

Later this year the IRS plans to send letters to taxpayers who appear to have had assistance with their returns, but the forms didn't have preparer signatures. The letter will inform taxpayers how to file a complaint against preparers who failed to sign returns and explain how to choose legitimate tax preparers.

Meanwhile, Congress also is getting involved in the tax pro regulation process.

The House Ways and Means Subcommittee on Oversight is holding a hearing on July 28 on the new IRS paid tax return preparer program.

"With so many Americans relying on paid professionals to prepare their returns, it is critical that we better understand what the IRS is doing and what impact the new regulations will have on taxpayers, paid tax return preparers and tax compliance," said Rep. Charles W. Boustany, R-La., subcommittee chairman, in announcing the hearing.

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