Unregulated Tax Preparers: Taxpayers Beware!

I was talking to a new client earlier this week about getting her tax information to me, so I could prepare her last three years of tax returns. (Stop snickering!) My client told me that her prior “CPA” had her records but that she had disappeared. Her “CPA” left the office space she was in without any notice or forwarding address. (This is more common than you think.) So, I told the client that I would help her report her ex-CPA to the state. Then my client came clean with me. “Oh, she wasn’t a real CPA, just a tax preparer”, she said. Well, first being a “real” CPA, I get my feathers ruffled when people use the term loosely. Years ago, I bought a bookkeeping practice that to this day many of the tax clients are convinced that the elderly gentleman that prepared their returns for years was a CPA. Not so. Not even close. His work papers and work habits were atrocious. Shame on me for not finding this out in due diligence. Shame on the IRS for not shutting down this crook.

In the State of Florida, the Department of Business and Professional Responsibility (DBPR), licenses barbers, beauticians, and numerous other professions, but not tax preparers. So, people that handle sensitive information, like Social Security Numbers, bank account information, and dates of birth, don’t have to be licensed, much less take a test to demonstrate a basic knowledge of how the tax system works. They go into business with minimal, if any consequences for their erroneous actions. Not to mention, they undercut a licensed preparer’s fees, which causes clients to go with the lowest bidder.

Preparers with certain professional credentials like certified public accountants, tax lawyers and enrolled agents must meet minimum standards for education and training. States license CPAs and lawyers, while enrolled agents are federally licensed. However, all other tax preparers are mostly unregulated.

The Courts have stymied the IRS’ efforts to oversee tax preparers. Since Congress has failed to act, we currently have a broken system. We need better oversight, testing and a continuing education requirement for preparers. The current situation is not fair to either the legitimate professionals or the tax paying citizens of our country. As always is the case, buyer beware!