‘Taxing’ Regulations

As if preparing your tax return wasn’t a pain already, the IRS has now made it more of a hassle. Everyone’s favorite government agency has plans to add new rules regulating paid tax preparers. Among the new rules: registration and a test.

Like most government regulations, this should be expected to increase the cost of tax preparation services for businesses and individuals. However, it will most likely adversely impact start-up and individual tax preparers more — making it harder for them to enter or stay in business. Such is often the case with most government occupational licensing.

The IRS Commissioner rhetorically justified the imposition of the new regulations in the following way:

“In most states you need a license to cut someone’s hair,” but today “most tax-return preparers don’t have to meet any standards when they sit down and prepare a federal tax return for an American taxpayer,” IRS Commissioner Douglas Shulman said in an interview Monday.

I wrote a column on the overbundance of occupational licensing in the Tampa Tribune a few years ago. In some respects, licensing like this can be viewed as collusion between government and industry professionals to favor those already established in the profession. This effectively reduces the amount of competition for those established in the industry, and, consequently, leads to higher prices for consumers.

2 Responses to ‘Taxing’ Regulations

  1. Joe Gehring says:

    I can definitely see the appeal of keeping the costs of “professional” tax preparation cheap at the risk of having it done incorrectly. That tradeoff completely makes sense. I went to H&R Block once to have my taxes done after getting married, and the preparer had no more knowledge than I did about what he was doing. He just had access to a computer with tax prep software on it. I would hardly say that made him knowledgeable, and would have welcomed the opportunity to ask for some proof that he knew what he was doing.

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