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Nina OlsonWASHINGTON -Although praising the Internal Revenue Service for its proposal to regulate income tax preparers, National Taxpayer Advocate Nina E. Olson is concerned that unenrolled preparers, who prepare returns but don't sign them, aren't covered by the proposed rules and that this could create a giant loophole.

Olson made the comments in her annual report that was delivered to Congress. Overall, she praised the regulation plan as "significant, far-reaching initiative.” However, since 2002, Olson has proposed that unrolled preparers be required to register with the IRS, pass a competency exam and complete continuing education courses. Those are the rules the IRS has proposed for paid preparers, although it would exempt CPAs, Enrolled Agents, and attorneys from the competency exams and additional continuing education courses.

The report foresees the possibility tax preparation businesses might employ one signing preparer, who would meet the new IRS requirements, and an unlimited number of nonsigning preparers.

The IRS plan announced this week would impose these requirements on return preparers who sign tax returns but not on preparers who meet with taxpayers and prepare their returns if someone else signs them.  To minimize cost and burden, a return preparation business may decide to employ one “signing” preparer who is certified under the new IRS rules and an unlimited number of “nonsigning” preparers.  The nonsigning preparers would not have to register, pass an exam, or take continuing education courses, and the signing preparer would be unable to thoroughly review every return he signs (in part because the interview with the taxpayer is central to accurate preparation of the return).
“We are concerned that excluding nonsigning preparers could create an exception that swallows the rule,” the report stated. It recommended that all unenrolled preparers be subject to the new rules. Those proposals would not take effect during the current tax season and will be introduced over a period not yet specified.

Last modified on Sunday, 02 June 2013
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