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THE NEW TAX PREPARER LAW

THE NEW TAX PREPARER LAW

There is a brand new law that will affect the individuals who prepare most income tax returns.

Most people are very surprised to learn that anyone can be a tax preparer.  That’s right!  As of the day I post this, August 21, 2010, there are NO requirements that you go to school; NO requirements that you take any tests; NO requirements that you have any experience; in point of fact, there are NO requirements of any kind to call oneself a professional tax preparer.

A person can hang out a sign today and say I woke up this morning and decided I’m going to be a tax preparer. 

Approximately 95% of all paid tax preparers in America have NO professional licensing of any kind!!!!  This includes the vast majority of all of the tax preparers at the national tax preparation chains.

This is true in the Commonwealth of Virginia as well as in about 43 other states.

Well, that is about to change.

A couple of years ago, Congress authorized the IRS to require any paid tax preparer to pass some licensing requirements.

In a nutshell, these requirements include:

  1. Register every year with the IRS and be assigned a preparer tax identification number.  This will cost every tax preparer in America $64.25 per year.
  2. After registering, preparers will be required to take a onetime test.  This will add another cost to the tax preparer.
  3. Upon passing the test, the tax preparer will be required to pass a background investigation.  Yet another fee the preparer must pay.
  4. Then, in order to maintain that license, the tax preparer must take at least 15 hours of approved continuing education courses in tax related subjects every year.  Still another expense for the tax preparer.

As a result of all of the time and new expenses involved, we expect many tax preparers to leave the business once this new law is fully phased in.

We strongly support these new requirements even though I am not sure they will succeed in ridding our industry of the bad apples.  Still, they are definitely a step in the right direction.

Now I would like to make a VERY IMPORTANT DISTINCTION between all the unlicensed tax preparers and the tax preparers at Heritage Income Tax Service.  You see, we fall into that tiny 5% that have taken a far more difficult path.  A path to professional licensing that has been around for many, many years.  Fewer than 5% of all tax preparers have gone through the rigorous process of getting this license simply because it wasn’t mandatory and the process to get that license was far more difficult and far more expensive than getting the license under the NEW preparer licensing law.

The professional license that we are under has been around for over a century.  A person with this license is called an “Enrolled Agent”.  All this means is that this person is enrolled to represent taxpayers before the IRS similarly to the way attorneys are entitled to practice before the courts.  More information about Enrolled Agents is available by clicking on this link.

Now, this is very important!  Because the Enrolled Agent has already demonstrated a much higher level of competence, Enrolled Agents along with Attorneys and Certified Public Accountants are exempted from the new licensing laws.

Further, the Enrolled Agents will still have much broader abilities to represent clients in audits and appeals.  Tax preparers under the new program will not be able to assist their clients in that manner.

I am writing this because I don’t want taxpayers to be confused into thinking that this new licensing program represents the best there is when seeking assistance from a tax preparer.  The new licensing laws simply let you know that an individual has met the absolute minimum requirements to even call themselves a tax preparer.  I do anticipate that many tax preparation firms will really build this up in their advertising as though it is really something special.  So please allow me to repeat, “All this law does is to require the absolute minimum so that an individual can’t wake up one morning and say, I think I’ll become a tax preparer today.”

If you seek a truly proven tax professional, you should seek an Enrolled Agent, a Tax Attorney, or a Certified Public Accountant who specializes in taxes.

One final word.

All of the tax preparers here at Heritage Income Tax are Enrolled Agents and would be happy to serve you if you should ever need assistance.  This means that we have the education, skills and expertise to, not only prepare your tax return, but we can also assist you with audits, audit reconsiderations, audit appeals, liens, levies, seizures and much more.

And, as I have said many times before, “The best doesn’t cost any more than the rest.”  So why would anyone ever want to use an unlicensed preparer?  Equally, why would one go to someone who had only met the bare minimum to so that they could call themselves a tax preparer?

Thanks for letting me share this information with you.

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Heritage Income Tax Service, Inc. | 4303 Portsmouth Blvd., Portsmouth, VA 23701
(757) 488-7232 | Fax (877) 488-7232

Heritage Income Tax offers a full range of tax preparation services. Located in Portsmouth, Virginia, we serve the entire Hampton Roads area including the cities of Chesapeake, Virginia Beach, Norfolk, Suffolk, Newport News and Hampton.