Tax Lawyer's Blog

What happens when you mix an Australian Law Professor, an American IRS economist, and an Israeli Lawyer?

You get a research paper titled Improving the Quality of Services Offered by Tax Agents: Can Regulation Assist?

In the United States, anyone with a pulse can prepare a tax return for someone else for a fee.

This is not true everywhere, however.

In Australia, for example, there are stringent requirements that must be met before someone can prepare a tax filing or otherwise represent a taxpayer before the taxing authorities.

The study may have implications for tax preparers in the United States:

[I]n the US in all states and territories other than California and Oregon, no educational or regulatory standards are imposed on the majority of individuals who prepare federal and state income tax returns for a fee.

The performance of tax agents in Oregon, with its relatively rigorous program of paid preparer regulation, was compared to tax agents in the rest of the US (except California). Paid preparer tax returns in Oregon were found to be both more accurate and more compliant on three measures of performance: (1) math errors, (2) potential reporting discrepancies of $10 or more for interest income, and (3) audit outcomes.

Prediction: Greater accuracy in the preparation of federal income tax returns will simultaneously increase federal tax revenues and decrease the government’s costs of assessment and collection of those revenues. President-Elect Obama has pledged to close the Tax Gap and, with the continued, exponential growth of the federal deficit as a result of copious bailouts, it wouldn’t surprise me if the he tried to implement a national system regulating tax preparers similar to those extant in Oregon and Australia.

(Thanks to Paul Caron of TaxProf Blog for giving me the inspiration for this post.)

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