Something is afoot in Washington. Newspapers yesterday (May 13th) contained a tidbit regarding the Internal Revenue Service’s (IRS) decision not to file an appeal with the Supreme Court. The adverse ruling in question was delivered in February by the U.S. Court of Appeal.
The subject of the case, Loving v. IRS, concerned the agency’s authority to regulate paid tax-preparers. In its decision, the appeals court argued the IRS overreached when it decided tax return preparers are representatives of their clients; and, so could be regulated by the IRS.
The court disagreed, citing the circular logic of the agency’s brief — they are, because the IRS claims they are. Its ruling was based, in part, on the fact that tax preparers have no independent authority to act on their client’s behalf before the IRS or to bind their clients to a settlement with the agency. Paid tax preparers are thus not representatives in the intended sense of the word.
What may be pure coincidence, but, I suspect is not, were hearings on Tuesday April 8th, by the Senate Finance Committee on the matter incompetent and unethical tax preparers. With all due respect to that august assembly, has the kitchen been spiking the Senate Bean Soup with sherry again? Otherwise, I am at a loss to explain why the Senate Finance Committee wasted precious time when more urgent matters are before it.
Okay — the hearings provided for good press and engendered comradely among committee members. After all, who will openly admit to advocating incompetence or unethical behavior in any profession? But let’s face facts — the hearings were a sideshow. The most urgent task confronting the committee is the reform, reduction and simplification of the US tax code.
Furthermore, I contend, a radical overhaul of the nation’s tax code will effect, as a desired consequence, a reduction in fraud and incompetence by paid tax preparers.
The reason for my confidence? A less prolix and complex tax code will deter fewer Americans from completing their own returns. Second, a streamlined, transparent tax code will be easier for the IRS to administer, enabling it to deploy more resources to fraud prevention, tax payer assistance and compliance. And, finally, tax preparers will be free to devote more time and energy to helping clients with the remaining complex tax situations. Given the tax code’s current length, its minutia and opacity, I contend only an exceptional few are able prepare a range of moderately complex tax returns without error.
Until root-and-branch tax reform is carried to completion, more regulation is not the prescription for the problem. Only when we have winnowed down the tax code’s length and parsed away the unnecessary complexity, then, and only the, should legislation be considered.
To read the entire essay, please click here: 20140513 Ipse Dixit