One of the wonderful things about the month of January is that we get to experience the results of various governmental follies of years gone by.
It's the time traditionally chosen for laws and regulations passed by Congress years ago to start to take effect.
And it's also the time of year when various government "regulatiions and standards", essentially laws imposed by agencies instead of passed by Congress, suddenly appear.
Today, the IRS reared its ugly regulatory head again, announcing a new set of compliance regulations for anyone who prepares tax returns for money.
You know, people like H&R Block and Jackson Hewitt preparers, tax lawyers, CPA's and the sort.
The people that the IRS' own research show that more than 80% of all US households use to do their taxes.
And, ironically, the same people that some of the IRS personnel themselves use to prepare their taxes.
( That, in itself, should alert someone to the fact that there is a fundamental problem with the US tax code, but that's a discussion for another day. )
According to the IRS, new regulations for paid tax return preparers will ensure “all preparers are ethical, provide good service and are qualified”, providing the most accurate information and assistance to taxpayers.
IRS Commissioner Douglas Shulman announced that the IRS plans to require paid tax return preparers to take a competency test and undergo a suitability check, which may include criminal background checks and tax compliance checks.
CPAs, attorneys and enrolled agents will be exempt from this requirement, as they are already certified by peer groups, although the report says the IRS will assess the quality of returns prepared by exempted individuals to determine whether those groups need to be included in the testing requirement in the future.
Other than members of the exempted groups, no other preparers will be exempt from the testing requirement, no matter how much prior return preparation experience they have.
All tax return preparers who are required to register with the IRS will be required to complete 15 hours of continuing professional education each year.
The 15 hours must include three hours on federal tax law updates, two hours on tax preparer ethics and 10 hours on federal tax law topics.
So far, so good.
Everybody thinks that if you pay somebody to do your taxes, they should be competent and give good, accurate advice.
After all, that's why you're using them in the first place.
But wait.
As they say, there's more.
The people who will be overseeing and certifying these preparers?
The staff of the IRS.
Which is kind of like the blind leading the blind.
See, the IRS folks don't seem to know much about their own tax code or how to interpret it.
The IRS has over 400 offices nationwide where you can get help and answers.
They're called Taxpayer Assistance Centers, and are staffed with IRS people who are supposed to know the law and give you answers to tax questions.
People whose salaries you already pay.
In a 2005 test of the system by the Treasury Inspector General, 35% of answers were incorrect.
That's a grade of "D" at best.
The Treasury Inspector General tested the system again to measure the quality of the taxpayer assistance during the 2007 filing season.
The results, according to a Nov. 15 Government Accountability Office report: The accuracy rate for responding to tax law questions was basically unchanged from 2005 --- 35% incorrect.
That's the good news.
The bad news is that IRS advice --- right or wrong --- is not binding -- whether given in person or in print.
You also can't rely on IRS publications, even the famed Publication 17, "Your Federal Income Tax".
If there's a mistaken answer, either verbally or in print -- tough!
There's no recourse against the IRS, and you as the taxpayer are still liable.
Thankfully, during the Reagan administration, then-IRS Commissioner Lawrence Gibbs initiated a policy where penalties would not be imposed on taxpayers who relied on incorrect information from IRS telephone taxpayer assistance personnel.
But that's just the penalties, not the tax itself.
And you've got the burden of maintaining a record of the name of the IRS employee who supplied the incorrect information and the date of the conversation.
In other words, if you get your information from an IRS employee on IRS's phone lines, YOU are held responsible if the information IRS has provided is wrong.
So, the IRS, in addition to being unable to police the accuracy of its own employees, will now be policing the accuracy of other professional tax preparers who get at least some of their information and direction from the very IRS people who are inaccurate to start with.
If this is starting to sound like the basis for an Abbott and Costello bit, you've got the picture.
Few teachers with a historic grade point average of 65% are effective in getting their students to achieve at levels of 75% or 85% or 95%.
It's time for a complete overhaul of the Federal tax code.
I favor a national sales tax, but there are other viable options as well.
Either way, having the folks who don't know the answers make sure that other people get the answers right is ridiculous.
"Just because there are a few hundred other people sharing your lunacy with you does not make you any saner." --- Oleg Kiselev
