State Regulation Of Tax Return Preparers

By Megan L. Brackney
Practical Tax Strategies
May 2015 Edition

Four states, Oregon, Maryland, California, and New York, have regimes for regulating otherwise unlicensed paid tax return preparers.1 Each state program includes compulsory education and some standards of practice. The most rigorous programs are those of Oregon and New York, which also include qualification exams and crim-inal penalties. This article examines the four state programs in depth, but before discussing these programs, it will review the current state of the IRS’s attempts to regulate return preparers. 

Licensed tax professionals are governed by standards of practice including state rules of professional responsibility and codes of professional conduct, Circular 230, and the Statements on Standards for Tax Services of the American Institute of Certified Public Accountants (AICPA). However, between 600,000 and 700,000 paid tax return preparers who are not CPAs or attorneys are not subject to any regulation beyond the penalty provisions of the Code. Responding to concern about the conduct and performance of some unlicensed paid tax return preparers, in 2011, theIRS issued regulations that attempted to expand the provisions of Circular 230 to tax return preparation. Among other things, the federal regulations required paid tax return preparers to pass a certification exam, pay annual fees, and complete at least 15 hours of continuing education each year.

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