Congress must enact greater taxpayer protections

Imagine you are among the 60 percent of Americans who pay someone to help you with your taxes each year. You make an appointment, gather your documents, take time out of your day to work with a preparer, and off your return goes. But then, a few months later, you receive a notice from the IRS that you owe thousands of dollars when you thought you were getting a refund. You attempt to call your tax preparer to get help, but the number is disconnected. You have one set of paperwork, but it turns out a different return was submitted on your behalf to the IRS.

Your preparer is gone, and you are stuck with the bill. What do you do?

This situation is one of the most stressful a taxpayer can experience: seeking help from a tax preparer you thought was an expert but turned out to be a fly-by-the-night or unqualified preparer who left you with nowhere to turn.

This is a legitimate and consistent problem that Congress is now looking to address.

Reps. Ron Estes (R-Kan.) and Terri Sewell (D-Ala.) recently introduced legislation, H.R. 3466, which would clarify the IRS’s authority to revoke a bad tax preparer’s Personal Tax Identification Number (PTIN) and thus protect taxpayers from habitually bad actors. The bipartisan proposal would create a process to allow the IRS to revoke a tax preparer’s PTIN based on negligence, fraud or abuse of the tax system.

The timing couldn’t be more important.

In 2017, The Federal Trade Commission ranked tax preparer fraud in the top 30 most common types of fraud. And, according to the National Taxpayer Advocate, nearly half of all taxpayers who seek assistance use a tax return preparer who is either non-credentialed or not subject to state oversight and standards. As a result, at the hands of too many incompetent and unethical preparers, innocent taxpayers have filed inaccurate tax returns or have had their identities and refunds stolen. Unfortunately, we’ve seen too many people in distress after a fly-by-the-night preparer scams them, steals their information, or leaves them liable to the IRS for the preparer’s mistakes or fraud on their returns.

This must change. If a tax preparer regularly files bad returns, they should be stopped.

Thirteen states — Alabama, Arizona, Delaware, Georgia, Iowa, Illinois, Indiana, Louisiana, Minnesota, Missouri, Ohio, Pennsylvania, and Virginia — have enacted legislation that gives states the resources to identify and stop bad preparers of state returns.

But state laws only go so far. For example, the Maryland Comptroller’s Office has successfully stopped $190.2 million in fraudulent payments over 10 years and blocked more than 88,000 fraudulent returns. In 2017, Maryland blocked 95 suspicious tax preparation businesses from filing returns and in 2018, stopped accepting returns from 75 preparers. However, in most cases, those businesses could still file federal returns with the IRS and continue taking advantage of vulnerable consumers.

We need a federal solution.

Now is the time to pass common-sense taxpayer service standards, like H.R. 3466 to ensure all American taxpayers are protected against identified bad actors who expose them to scams and abuse. Congress should join Estes and Sewell and quickly pass PTIN revocation legislation to prevent Americans from further taxpayer preparer fraud. Taxpayers’ financial well-being depends on it.

Karen Orosco is the Senior Vice President of U.S. Retail Sales and Service at H&R Block