New bill calls for tax preparer regulation

Congress is once again looking at regulating tax preparers.

Rep. Steve Cohen, D-Tennessee, has reintroduced the Tax Return Preparer Accountability Act, H.R. 1983, which would provide the Internal Revenue Service with "explicit authority" to regulate tax preparation services by enacting training and integrity requirements.

The bill, permitting the IRS to establish what Cohen called "minimum standards for accuracy and fairness," was referred to the House Ways and Means Committee after Cohen introduced it on March 10.

Andrew Harrer/Bloomberg

The bill would also: 

• Direct the IRS to implement an automated formula to identify taxpayers at risk of economic hardship; 
• Authorize the IRS to establish minimum competency standards for federal tax return preparers and revoke the identification number of sanctioned preparers; and, 
• Recommend tax software changes, including requiring all tax software providers to adhere to prescribed information security controls and regular updates of security standards.  

"Most tax preparers are honest and trustworthy but, unfortunately, we've all heard or read about unscrupulous tax preparers who take advantage of customers or assist clients in claiming deductions to which they are not entitled," Cohen said in a statement Tuesday. "To guarantee that taxpayers get the quality service they deserve, the Tax Return Preparer Accountability Act will permit the IRS to establish minimum standards for accuracy and fairness." 

The recommendation to regulate preparers pops up regularly in Washington. Last year, the IRS Electronic Tax Administration Advisory Committee asked Congress to regulate noncredentialed tax preparers, among other recommendations, and Cohen himself introduced similar legislation as early as 2015.

During the Obama administration, the IRS began to roll out the Registered Tax Return Preparer Program, which required registration, testing and continuing education for preparers. A federal judge invalidated that program in 2013 after a lawsuit, Loving v. IRS, filed by a group of independent tax preparers.

Regulation of unenrolled tax preparers has been a longstanding goal of the IRS since Loving, including the agency offering the voluntary Annual Filing Season Program. Other bills have been introduced in Congress to regulate unlicensed preparers, and the Biden administration included a proposal in its American Families Plan in 2021.