NEWS .

NEW REQUIREMENTS FOR TAX RETURN PREPARERS

New Requirements for Tax Return Preparers

At the beginning of January the IRS has opened the new tax return season. Its first step was to announce a number of new regulations regarding the tax preparers. Some of the new rules will become valid already during the ongoing tax season, and by taking these steps the IRS hopes to increase taxpayer confidentiality protection and increase the level of overall tax compliance. Targeting the tax preparers was not chosen at random: over 80% of american taxpayers use the services of paid preparers in order to file their tax forms.

Other important steps that will be implemented in the upcoming years include:

- Mandatory registration for every paid preparer with IRS, and issuing PTIN - Preparer Tax Identification Number. All preparers will be subject to a federal tax check, IRS agents will verify that the preparers have properly filed their federal tax returns and have no outstanding debts.

- Regular competence tests for all preparers that are not lawyers, CPAs or

- Mandatory continuous education for all tax preparers that are not lawyers, CPAs or licensed tax professionals.

- Extension of the ethical code that is currently enforced only for lawyers and CPA to all paid tax preparers.

These steps are planned to change the current state of affairs, when every individual can legally charge others for preparing tax return forms on their behalf. Doug Shulman, the head of IRS, states that these new regulations constitute a major shift in IRS' approach to overseeing the field of tax preparation. At the same time, he stressed that every taxpayer is fully responsible for accuracy of the tax return, regardless of who has actually prepared it.

As a first practical step, IRS will mail out 10000 letters to tax preparers that submitted significant number of tax returns with serious errors. Moreover, IRS agents will visit with the majority of these preparers and further investigate, while retaining the power of invoking civil or even criminal proceedings as necessary.

And when general public comes to choose the individual or a company to handle their tax return preparation, the IRS suggest following these guidelines:

- Avoid preparers that offer increased tax returns

- Avoid preparers that base their fee on the amount of the return

- Use the services of reliable and reputable professionals that will be able to answer any question regarding the tax return

- Evaluate preparer's qualifications - only lawyers and CPAs are legally certified to represent a client before the IRS. Other paid tax preparers can only answer questions regarding the paperwork that they handled personally.

- Evaluate preparer's professional affiliation - choose a professional belonging to an association that requires continuous education and enforces ethical code.

In summary, the steps laid out by IRS are, in fact, designed to provide the general population of taxpayers the same level of confidentiality and protection as provided today by lawyers and CPAs.