Newsflash: IRS Preparer Regulation Won’t Eliminate All Preparer Fraud

Newsflash: IRS Preparer Regulation Won’t Eliminate All Preparer Fraud

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Joe Kristan, a very vocal opponent of IRS regulation of tax preparers, wrote this today on his blog:

From the Memphis Commercial Appeal: 

A Memphis woman who admitted to preparing bogus income tax returns has been sentenced to 22 months in federal prison.

Cassandra Jordan, 46, also must make $75,000 in restitution to the Internal Revenue Service, according to the order by U.S. Dist. Court Judge Jon McCalla. 

Authorities said Jordan prepared false tax returns for others for the years 2005 and 2006 and made false claims for tax refunds ranging from $3,716 to $6,620. 

So explain again how having a PTIN and taking some Trivial Pursuit “competency test” keeps somebody from concocting deductions? An IRS license to do returns will just make sure that the cheaters have a government seal of approval.

Joe’s argument reminds me of the one the drug-decriminalization crowd routinely proffers: We should legalize drugs because people continue to use drugs even though they are illegal. 

The following comment I left on Joe’s site addresses this tautological argument:

Joe, we have laws that make rape and murder illegal yet we still have rape and murder. It is a non-argument to point to continued incidents of tax preparer fraud as proof that regulation of tax preparers doesn’t work. Nobody in his or her right mind has suggested, or would ever suggest, that the regulation of tax preparers will eliminate all preparer fraud.

I have no objection to those who oppose IRS preparer regulation on the grounds that its costs exceed its benefits, but merely pointing to isolated incidents of tax preparer fraud as evidence that we should have less rather than more regulation is absurd.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

Comments

  1. Supporters of the absurd new preparer regime cite instances like this as reasons for new regulations — even though the regs will do nothing to stop them. It’s fair to point that out. Having me, you, and other law-abiding preparers jump through hoops does nothing to stop the cheaters.

    It’s also worth noting that in this case, the offender is being punished severely under the old “non-regulated” system. I don’t argue that she shouldn’t be punished. I just don’t think you and I should pay for her sins.

  2. Joe,

    I am not nearly as pro-regulation as I once was. I can see now that the IRS a) may abuse the program, and b) is probably not competent enough to implement it properly.

    In short, I am beginning to think that the costs of regulation will exceed its benefits.

    However, I still strongly believe that the existence of a regulatory regime will discourage a lot of bad actors from entering the tax preparation field.

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