We all know the benefit that H&R Block, Jackson Hewitt and the like will receive from the IRS proposed preparer regulations. Will these new regulations protect the public or increase proper compliance?
If today's IRS news release is any indication, these new regulations are unnecessary. The IRS today suspended a Houston, TX tax preparer for 12 months for providing false and misleading information in connection with the filing of tax returns.
This CPA, according to the news release, instructed clients to forward funds to two corporations that he controlled. There was no business purpose, other than to get rid of the cash. The funds were then rebated to the clients. A deduction was taken and fully expensed on the client returns. IRC sec. 162 requires business and trade expenses to be ordinary and necessary in order to be deducted.
The crazy thing about both the new regulations and any scandal involving a tax preparer is that the compentency of the individual involved is rarely in question. This guy was a licensed CPA and I see no reason why he would not be able to pass any test the IRS could formulate. (As a CPA, he would not be required to pass the competency exam.)
If today's IRS news release is any indication, these new regulations are unnecessary. The IRS today suspended a Houston, TX tax preparer for 12 months for providing false and misleading information in connection with the filing of tax returns.
This CPA, according to the news release, instructed clients to forward funds to two corporations that he controlled. There was no business purpose, other than to get rid of the cash. The funds were then rebated to the clients. A deduction was taken and fully expensed on the client returns. IRC sec. 162 requires business and trade expenses to be ordinary and necessary in order to be deducted.
The crazy thing about both the new regulations and any scandal involving a tax preparer is that the compentency of the individual involved is rarely in question. This guy was a licensed CPA and I see no reason why he would not be able to pass any test the IRS could formulate. (As a CPA, he would not be required to pass the competency exam.)
Hopefully, a few more of these stories will break before any new regulations take affect and people will recognize the regulations for what they are: barriers to entry in the tax preparation profession.
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