IRS Plans To Regulate Tax Preparers
The Internal Revenue Service (IRS) plans to regulate the U.S tax preparers from the 2011 tax season. This includes mandatory registration, competency testing and continuing education requirements for tax preparers.
Tax preparers, such as H&R Block Inc. (NYSE:HRB) and Jackson Hewitt Tax Service Inc. (NYSE:JTX) may need to satisfy these requirements.
According to the IRS, over 80% of Americans use a tax preparer or tax software for filing their tax returns. The new regulation is intended to standardize the tax preparer market and take actions against any misconduct by them.
According to the IRS new proposal, all paid tax preparers are required to sign a federal tax return to register with the IRS and get a preparer tax identification number. Additionally, the tax preparers must pass the competency test and must satisfy the continuing professional education requirements. However, there is an exemption for attorneys, certified public accountants and enrolled agents who are already subject to their own professional exams and continuing education requirements.
However, regarding the tax software sector, there was no new recommendation for regulations. TurboTax, a software package developed by Intuit Inc. (NASDAQ:INTU), is a popular one.
Though the new move is not expected to provide any near term benefits, the implementation of the regulation by the IRS will help H&R Block in the long run. The company, a leader in tax preparation services, already offers trained staff. This will provide it an edge over smaller rivals and independent firms, many of which do not posses any tax rule competency.