IRS considers regulating tax preparers

IRS Commissioner Douglas Shulman announced Thursday that he is considering requiring income-tax preparers to be licensed in order to increase compliance with the law and to ensure high ethical standards of conduct.

“This is nothing less than a transformational shift,” Mr. Shulman said at a hearing held by the House Ways and Means subcommittee on oversight.

The change could help to recover a portion of the estimated $290 billion in uncollected taxes each year, Mr. Shulman said.

Mr. Shulman said he expects to make his recommendations to Treasury Secretary Timothy Geithner and President Obama before the end of the year.

The potential recommendations “could focus on a new model for the regulation of tax return preparers; service and outreach for return preparers; education and training of return preparers; and enforcement related to return preparer misconduct,” the IRS said.

“Tax return preparers help Americans with one of their biggest financial transactions each year,” Mr. Shulman said. “We must ensure that all preparers are ethical, provide good service and are qualified.”

Rep. John Lewis, Georgia Democrat and chairman of the oversight subcommittee, complained about “fly-by-night people” who close up their businesses after the tax-preparation season ends.

Mr. Shulman reported that 87 percent of taxpayers now use computer software or a paid preparer. “Tax preparers and the associated industry can help us increase compliance and strengthen the integrity of the tax system,” he said.

The first step of the process will involve fact finding and receiving input from unlicensed tax preparers and software vendors, as well as from those that are licensed by state and federal authorities, including lawyers and accountants, the IRS said.

“Everything is on the table,” Mr. Shulman said.