Senate Finance Committee members Ron Wyden (D-OR) and Benjamin Cardin (D-MD) recently introduced the Taxpayer Protection and Preparer Proficiency Act of 2015, granting the IRS authority to regulate paid tax return preparers. The legislation is a response to Loving v. IRS, which weakened taxpayer protections by invalidating the Service’s mandatory registered tax return preparer program. The bill requires that tax return preparers demonstrate competency in assisting persons preparing tax returns, claims for refund and associated documents. The bill references “26 USC § 7701(a)(36) to define a tax return preparer as any person who prepares for compensation any tax return or claim for refund. The bill also grants the IRS authority to sanction tax return preparers who mislead or threaten a person who is represented, a prospective person to be represented, or a prospective person who may be represented.
According to Senator Wyden, the bill “helps protect hard working taxpayers by ensuring that tax preparers are held to clear and enforceable standards.” After the Loving decision ended the tax return preparer program, the IRS implemented a voluntary annual filing season program, which required continuing education and a record of completion for return preparers. This new bill provides authority to the IRS that the Loving court bemoaned for not having when attempting to regulate return preparers. While many are still unsure whether or not the bill will ultimately pass, it represents a first step in Congress’ battle for tax reform.