Top Senate taxwriters released draft legislation Thursday that they say would “improve the taxpayer experience” — included are proposals to rein in non-credentialed tax return preparers and increase penalties for tax professionals.
The Taxpayer Assistance and Service (TAS) Act discussion draft, released January 30 by Senate Finance Committee Chair Mike Crapo (R-ID) and Ranking member Ron Wyden (D-OR), consolidates National Taxpayer Advocate recommendations and past tax administrative legislation into one package.
Crapo and Wyden said the draft’s goals are “to facilitate communication between the agency and taxpayers, streamline processes for tax compliance and disputes and ensure taxpayers have access to timely expert assistance.”
Provisions targeting tax professionals. The bulk of the provisions address IRS functionality, Tax Court procedure, and the Taxpayer Advocate Service. However, a few provisions specifically target tax professional wrongdoing.
Non-credentialed tax return preparers. The TAS Act calls for sweeping changes to the PTIN process, specifically for paid, non-credentialed tax return preparers. It would require these non-credentialed preparers to demonstrate their “suitability.” Preparers would need to provide information about their competence and character and pass a criminal background and tax compliance check.
Non-credentialed preparers also would need to complete up to 18 hours of CE each year, covering ethics, professional responsibility, and tax law. In addition, the proposal would allow the Treasury Secretary to require these preparers to complete targeted CE, up to 18 hours annually, related to their return errors.
Preparers who fail to meet suitability and CE requirements, or who are deemed “incompetent” or “disreputable,” may have their PTIN denied, suspended, or revoked by the IRS under the proposal.
Licensed attorneys, CPAs, and enrolled agents who are authorized to practice before the Secretary under Circular 230 are exempt from the suitability and CE requirements. In addition, preparers with an AFSP certificate would be treated as satisfying the CE requirement for the year to which the certificate applies.
Additional PTIN provisions. “Ghost” preparers who intentionally fail to furnish a valid PTIN— or willfully furnish another preparer’s PTIN — are targeted in the draft. These offenses would be classified as felonies, punishable by a fine of up to $50,000, or $100,000 for corporations, and 2 years in prison.
The TAS Act also would increase general penalties for preparers who, without reasonable cause, fail to furnish a valid PTIN. These preparers would be subject to a penalty of $250 per offense, up to $75,000. A $250-per-offense penalty would also apply for electronic return originators who provide incorrect electronic filing identification numbers.
Altered returns. The draft calls for an expanded definition of a “return” to include submissions that are altered by a tax preparer after the taxpayer has signed. With this revision, tax preparers who understate a taxpayer’s liability or commit certain other violations under Code Sec. 6694, Code Sec. 6695, and Code Sec. 6695A would be subject to penalties — even when they do so by altering a return post-signature.
Other penalty changes. The TAS Act also would increase several preparer penalties under Code Sec. 6695. Offenses covered include failure to furnish copies of returns to taxpayers, failure to retain copies of prepared returns, and failure to file current information returns identifying return preparers. Tax preparers that misappropriate tax transfers or fail to comply with due diligence requirements would also face increased penalties.
Additional provisions. The draft would make a number of other changes to enhance taxpayer rights. Among those highlighted by Crapo and Wyden are proposals addressing IRS “math error” notices, extending the “mailbox rule” to electronic submissions, simplifying foreign bank account report (FBAR) compliance, and revising tax processes and penalties for taxpayers who are held hostage abroad.
The lawmakers also are calling for revisions to the offers-in-compromise review process, an expansion in Tax Court jurisdiction, increased taxpayer access to the IRS Independent Office of Appeals, and a strengthened IRS whistleblower program.
A full, section-by-section summary of proposal changes can be found here.
Comments. The American Institute of CPA’s Melanie Lauridsen praised the draft, calling it “one of the most significant tax packages we will have seen in recent years.” According to Lauridsen, the proposed changes “will be instrumental in establishing a foundation that helps simplify some of the laborious tax filing processes and allows taxpayers to better meet their tax obligations.”
National Taxpayer Advocate Erin Collins said the TAS Act would “significantly strengthen taxpayer rights in nearly every facet of tax administration” She “encourage[s] taxpayers and the tax professional community to carefully review the draft and provide feedback to refine it.”
Feedback on the proposal is requested by March 31, 2025, and can be emailed to discussiondraft@finance.senate.gov.
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