- The Foundry: Conservative Policy News Blog from The Heritage Foundation - http://blog.heritage.org -
Tales of the Red Tape #23: Internal Revenue Scam
Posted By Diane Katz On January 4, 2012 @ 10:56 am In Enterprise and Free Markets,Featured | 7 Comments
The straight text of the U.S. tax code exceeds 5,000 pages. Throw in the annotations necessary to actually decipher the thing and it swells beyond 72,000  pages. (Instructions for filing the “EZ” form run 41 pages.) All of which will yield a whopping $2.6 trillion in federal tax receipts  (estimated) for 2012.
So, naturally, the Internal Revenue Service (IRS) has concocted new regulations that make the preparation of tax returns even more difficult and costly.
The new rules  require tax preparers who aren’t lawyers or Certified Public Accountants to obtain a “Preparer Tax Identification Number” (PTIN) every year (at an aggregate annual cost of at least $60 million), pass a “competency” exam ($116 million, all told), submit to a “suitability” check by the IRS, and accumulate at least 15 hours of continuing education credits each year (up to $200 per course).
The big heads at the IRS evidently believe that the 1 million or so unregulated (gasp!) tax preparers are responsible for the dismal state of our tax system. As opposed to, say, 72,000 pages of contorted tax rules that no one understands—including IRS agents.
All told, the agency estimates that new record-keeping costs alone will top $48.5 million a year. (Alas, the vast majority of the individuals subject to the new rules either operate or are employed by small businesses.)
The IRS contends that the costs are justified by the “special benefit” conferred upon tax preparers of being allowed by the government to receive compensation for preparing federal tax returns. (In other words, tax preparers ought to be downright grateful about paying the government for the right to ply the very trade they practiced before the IRS turned it into a “special benefit.”)
To handle all the paperwork associated with the new rules, the government has created a Return Preparer Office “dedicated solely…to best serve tax return preparers and taxpayers by providing efficiency and expertise in this area.”
(Oops. The efficient and expert employees of said office have already issued PTINs to 331 imprisoned felons—43 of whom are serving life sentences, according to a recent report  by the Treasury Inspector General for Tax Administration.)
May we suggest that the IRS worry first about the competency of its own? For example:
So what we have, then, is a new regulatory scheme that won’t dent the real problem—our incomprehensible tax code—but will make it more costly for taxpayers to hire the help they need to comply.
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2012/01/04/tales-of-the-red-tape-23-internal-revenue-scam/
URLs in this post:
 Image: http://author.blog.heritage.org/wp-content/uploads/irs-building.jpg
 72,000: http://www.cch.com/wbot2011/WBOT_TaxLawPileUp_(28)_f.pdf
 $2.6 trillion in federal tax receipts: http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist02z1.xls
 new rules: http://www.federalregister.gov/articles/2011/06/03/2011-13666/regulations-governing-practice-before-the-internal-revenue-service
 report: http://www.treasury.gov/tigta/auditreports/2012reports/201240010fr.pdf
 Treasury Inspector General for Tax Administration: http://www.journalofaccountancy.com/Issues/2011/Nov/MathErrors.htm
Copyright © 2011 The Heritage Foundation. All rights reserved.