Oversight of tax preparers will benefit taxpayers as well as the nation's coffers

Right now, anybody and their mama can set up shop and prepare tax returns. This can lead to fraudulent and inadequately prepared returns. Internal Revenue Commissioner Doug Shulman wants to fix this problem.

There are tax professionals who are licensed by state or federal authorities and are subject to censure, suspension, or disbarment from practice before the IRS in the event of wrongdoing. Yet for a large group of commercial preparers, there is virtually no training, no licensing, and no federal oversight, according to Nina E. Olson, the national taxpayer advocate.

Some states require commercial tax preparers to be trained and licensed. Last year, Maryland passed a law creating a new licensing and regulatory program for individual tax preparers.

However, because only a handful of states regulate preparers, Shulman sees the need for licensing to be uniform and perhaps federally regulated. The commissioner wants to have a set of recommendations ready by the end of the year to hand to the Treasury secretary and President Obama.

Shulman was reluctant to say what recommendations he would advocate. He said he first wanted input from taxpayers along with licensed preparers as well as unlicensed tax preparers and tax software vendors.

Shulman said the IRS plans to hold a number of public forums in Washington and around the country. Information about these meetings will be posted on the Tax Professionals page on the IRS website, www.irs.gov.

It's about time this was put on the top of the agenda for the IRS. Although many tax professionals do their jobs well, there are enough unscrupulous preparers to warrant some changes, especially given the more than $300 billion estimated tax gap from people who should pay but don't.

Even if you didn't know your return was fraudulently prepared, the IRS still holds you responsible. If the IRS catches a fraudulent return, it's you - the taxpayer, not the preparer - who has to pay the additional taxes, interest, and/or penalties.

Although individuals are held responsible for what's on their tax return, the IRS does go after bad preparers. The IRS can assess civil penalties against deceitful return preparers. The agency also refers criminal activity by return preparers to the Department of Justice for prosecution.

In fiscal 2008, 124 tax-return preparers were found guilty of fraud. In 81 percent of the cases, the preparer was sentenced to some form of incarceration.

Although the IRS is catching many tax cheats, greater scrutiny could bring in more tax dollars. And lord knows the country needs the money.

Michelle Singletary is a columnist for The Washington Post. She can be reached at singletarym@washpost.com.