Most of the American public doesn’t know that my industry is not regulated. Believe it or not, anybody can go into the business of tax preparation. All it takes, is a little bit of knowledge, computer software, and a little ingenuity. We regulate everything from plumbers, to building contractors.
But when it comes to tax preparers, they are not regulated. A couple years ago, the Internal Revenue Service tried to regulate tax preparers. Unlicensed tax preparers, sued the Internal Revenue Service, and won. As a consequence, today we sit here in an unregulated business.
This poses a problem for those that are licensed like me. For instance, I am required to take 30 hours of continuing professional education per year to keep my license active. Every three years, I have to renew my license. In fact, I just renewed it last month. On top of the education requirements, I have to stay on top of tax law, which changes every single day. I spend at least two hours every morning going over the changes that have occurred. I read Tax Court cases, I read appeals court cases, I read updates to the Tax Code, etc. I am licensed by the Department of Treasury, Internal Revenue Service. I have been admitted to practice before the Internal Revenue Service, as an Enrolled Agent. I do nothing more than taxes, and tax planning. This is different than a Certified Public Accountant, who is licensed by the state that they practice in, and most do not specialize in taxes. They do other things. I am governed by Circular 230. Circular 230 is a Circular of what I can do what I cannot do. I am governed by the Office of Professional Responsibility, within the Internal Revenue Service. They are under the Department of Justice.
Here is my problem with unlicensed tax preparers. Because of all of the education classes I have to take, the studying I do, and all the other license requirements that I have to meet, being in business is more expensive for me than it is for an unlicensed tax preparer. As a consequence, and because my experience, I charge three or four times more than an unlicensed tax preparer. I lose business to unlicensed tax preparers all the time. I often tell clients, you get what you pay for. Some listen to that, and some do not.
The other night, I happen to be watching television, and I saw a commercial from one of the big tax preparation companies. Mind you, they have no licensing requirements. Some people that work for that company, may be licensed, but it’s not normal for them to hire licensed individuals. During the commercial, they guaranteed that they would get someone more of a tax refund than anybody out there. I could never say that. Circular 230 forbids it. It entails, that I’m either going to commit tax fraud, or do something on your tax return, that I shouldn’t do. One plus one will always equal two. There is no magic formula, where I waved my wand and you get this magic refund that you didn’t expect. If I were to go on television, and make that claim, I would have my license taken away. Further, how could you make a claim like that? It is disingenuous, to say the least. But, millions of people of heard it and I may have lost the client to it. It is not my clientele that they are going after, so I’m not that upset. I just wish, the rules were the same for everybody. I have to operate under certain guidelines, and everybody else should as well.
The good news is, Congress is taken up the measure to regulate tax preparers. It is become something that they feel deeply about. Frankly it’s about time. We all need to operate under the same rules, and have the same guidelines.
I was asked the other day, what somebody should look for when they’re looking for an accountant to prepare their tax returns. The answer I gave was, you want somebody that’s licensed. Either an Enrolled Agent, or a Certified Public Accountant that specializes in taxes. Stay away, from people that don’t have Initials after their name. I fix a lot of tax returns from the big tax preparation companies. How they hire their staff, is that after tax season, they offer tax preparation courses. These courses go on for about four weeks, and after the class is over, the hire the students in the class. The only training they receive, is that four-week class. If you ask me, that’s a little scary. I passed a two day four-part examination. I’ve been in practice for 21 years. I didn’t just learn this four weeks ago. I’ve been doing it most of my adult life.
Be very very careful, who you choose to prepare your tax return.