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New IRS regulations could make it more difficult and expensive to prepare your taxes

Published in Blog on July 17, 2017 by Convention Of States Project

The overlords of the Internal Revenue Service already make it their business to dig through Americans’ financial lives every year. Now Congress is considering limiting who taxpayers can turn to for help.

Thanks to a federal tax code that is endlessly confusing and frustrating, an estimated 80 percent of Americans needed assistance filling out their returns this year.

But citing a need to crack down on fraud, two Republican members of Congress have proposed a new licensing system for tax preparers. If passed, it likely would put more small tax preparers out of business and help big companies that profit off the complexities of the U.S. tax code.

Under the legislation authored by Reps. Diane Black, R-Tennessee, and Pat Meehan, R-Pennsylvania, tax preparers would have to register with the IRS, submit to a background check, pass an exam and complete continuing education classes each year.

The two lawmakers say the licensing rules are intended to cut down on $15 billion in improper earned income tax credits handed out in 2013.

Critics say the proposal is a case of government making worse a problem government created to begin with.

“With a tax code so unwieldy and complicated that nearly every American needs help complying, how would regulating preparers make things easier? It won’t,” says Chris Koopman, a research fellow at the Mercatus Center, a free-market think tank. “The problems with tax compliance have little to do with who is preparing returns. Making it more difficult for individuals to get the assistance they need will help no one.”

Well, that’s not entirely true.  It will help one specific group: the companies that make their money during tax season, like H&R Block, Jackson Hewitt (which owns the Turbo Tax software brand) and CPAs.  As the Wall Street Journal reported, the professional tax preparing industry is cheering for the new licensing rules because they would reduce competition and force taxpayers to use their services.

Isn’t that just grand?  Businesses that exist solely because of the complexity of the federal tax code (in other words, businesses that wouldn’t exist if it wasn’t for the federal government’s interest in every aspect of your financial life) are lobbying for the federal government to create even more rules so they can make even more money off taxpayers.

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