The Government’s Tax Racket Grows New Tentacles

Posted: January 5th, 2010 by Militant Libertarian

by Karen De Coster

The large special interests have won again, and you folks all lose. Do you think it is pricey, now, to have your taxes prepared at a place like H&R Block or Jackson Hewitt, or even the smaller Mom-and-Pop tax prep shops? Special interests who stand to profit from this new and corrupt scheme have convinced your government to regulate tax preparation companies and paid tax preparers. Tax preparers will  now have to meet new federal standards for “quality.”

Under the new rules, employees of chain tax-preparation firms including H&R Block Inc. and Jackson Hewitt Tax Service Inc. will be required to pay a registration fee to the IRS, pass a “competency” exam and have 15 hours of education a year. Previously these employees weren’t required to meet federal standards.

The requirements also will apply to hundreds of thousands of independent preparers and mom-and-pop storefronts that offer tax preparation as one of several services. About 60% of U.S. taxpayers use tax preparers, according to the IRS. That number includes certified public accountants, or CPAs, who are already subject to professional standards and aren’t covered by the new rules.

…starting in 2011, all paid tax preparers will have to register with the IRS and include a unique identification number on any returns they prepare. Preparers will be given three years to pass a competency exam in either individual or small-business taxation.

Kathryn Fulton, a senior vice president for government relations at H&R Block, said “we welcome the move.” Of course they do. H&R can afford to cover the costs and/or pass them on to customers. Additionally, a loophole for H&R maybe available because its paid preparers work under supervisors, and thus those preparers may not be subject to the regulation. So that could be a major price advantage for them, driving up their competitors’ costs/prices relative to their own. I’m sure H&R’s ‘VP for government relations’ is hard at work on making a slick deal for the big tax firm. This reminds me of executives at the quasi-governmental corporate state giant, General Electric, who said about Sarbanes-Oxley: “We welcome the move.” Indeed, because they knew Sarbanes-Oxley would hinder and cripple smaller firms much more so than ginormous firms like GE.

Intuit, the maker of Turbo tax, also lobbied hard for the regulations so the company can drive business its way. I have a little tidbit for readers, since I know a little about this business: Mark Ernst resigned as CEO of H&R Block in 2007, and where did he land? He is a Deputy Commissioner at the IRS.

I found this quote quite remarkable, coming from an enrolled agent who sees “unregulated” tax preparers as being bad for his business (because they offer competition at lower prices): “We want to make this into a profession, not just a part-time thing you set up on the kitchen table for six weeks during the tax season.” Let’s see, the tax season is about three months long, and that means? Most paid preparers are part-time for that very reason. Many are homemakers who only want to work for part of the year, and many, like some of my non-CPA, business colleagues, do tax work to supplement their income. Many of these folks will be driven from their part-time jobs.

I’ll leave you with a comment from a WSJ reader: “How about fixing the tax code so we don’t need tax preparers?” Easy answer. Because government works to empower large, wealthy special interest groups and enables them to profit handsomely from its massive web of taxes, codes, and regulations that enslave powerless American citizens within the omnipotent corporatist state.


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