IRS mulls oversight on tax preparers

? Tax-return preparers may soon be subject to training, licensing and federal oversight.

Right now, anybody and their mama can set up shop and prepare tax returns. As you can imagine, this can lead to fraudulent and inadequately prepared returns. Internal Revenue Commissioner Doug Shulman wants to fix this problem.

There are tax professionals — attorneys, certified public accountants and enrolled agents — who are licensed by state or federal authorities and are subject to censure, suspension or disbarment from practice before the IRS in the event of wrongdoing.

Yet for many commercial preparers, there is virtually no training, no licensing and no federal oversight, according to Nina E. Olson, the national taxpayer advocate.

However, because only a handful of states regulate preparers, Shulman sees the need for licensing as uniform and perhaps federally regulated.

The commissioner wants to have a set of recommendations ready by the end of the year to hand to the Treasury secretary and President Obama.

“Tax-return preparers help Americans with one of their biggest financial transactions each year,” Shulman said. “We must ensure that all preparers are ethical, provide good service and are qualified. At the end the day, tax preparers and the associated industry must be part of our overall game plan to strengthen the integrity of the tax system.”

Shulman was reluctant to say what recommendations he would advocate.

He said he first wanted input from taxpayers along with preparers who are licensed by state and federal authorities as well as unlicensed tax preparers and tax software vendors.

There are enough unscrupulous preparers to warrant some changes, especially given the more than $300 billion estimated tax gap from people who should pay but don’t.

Olson has called for more oversight, training and licensing of commercial tax-return preparers. In her most recent report, she recommended that Congress enact a federal registration, examination, certification and enforcement program for unenrolled tax-return preparers.

Although the IRS is catching many tax cheats, greater scrutiny, licensing and regulation could bring in more tax dollars. And lord knows the country needs the money.