Most reasonable people will agree on the fact that life is often a study in degrees. In any given situation, efficiency and cost-efficiency are best served by meeting a given need by an appropriate level of servicing that need.
For example, did you cut yourself shaving? A piece of wet tissue paper or a band aid usually does the trick. However, a deeper gash needs professional attention.
If you have some bug or tar spots on your car, a solvent purchased at the department store and some elbow grease will usually remove all of the blemishes. But did you drive through some acid rain? In that case, call your local auto body shop!
But when it comes to tax preparation, we find often that many otherwise reasonable people with known complexities in their situation will act unreasonably, and will look to get things done as cheaply as possible. If you want a cheap fix, the options of off-the-shelf software programs, and seasonal, unregistered storefront preparers are all easy to find. But neither will be of help to you during your time of need if an error is made, or should a question arise.
Do you think I am over-dramatizing? I wish. At a recent session of the U.S. Tax Court, I rode down the elevator with a lovely young mom (“Lori”) who was called before the Court to explain her misdeeds to a Federal Judge. She was poor, and could not afford a lawyer or a practitioner. In approaching me, she somehow felt secure and shared her woes with me. Her crime? Admittedly knowing nothing about income taxes. She trusted a local “refund mill” tax preparer that was later criminally charged for falsely creating large refunds for 300 clients. She just so happened to be one such client. I felt terrible and walked her back into the building to talk to a volunteer clinician, who thankfully, was able to get her on the right track.
The Federal Government arguably acted somewhat out of character about five years ago. Seeing what was happening to the “Lori’s” of the world, it embarked on a massive house cleaning effort demanding that all tax preparers register and pass basic competency tests to thereby root out the bad apples. To fund this effort, all of the “good guys” on the right side of the law were forced to pay additional costly fees for yearly registration. Many of us chafed at this, but many of us felt that if this was what it took to have the losers leave town- we were all for it.
But a funny thing happened on the way to the fair. This government endeavor was challenged by several unenrolled preparers. They made the claim that what they did every winter was not “practice” or “client representation,” but rather, just a personal service that the government had no power to regulate. To that end, the Federal District Court did likewise and ruled that preparation of a tax return cannot be regulated by the Federal Government. The government declined to appeal this matter to the U.S. Supreme Court, as the possibilities for acceptance and victory were quite small.
So where does all of this leave us? In a much bigger mess than where we first started. The bad guys still roam. A large part of the commercial preparer block goes unregulated and is not subject to mandatory training and education as licensed practitioners are. A system of “voluntary” tax preparer regulation by the IRS Commissioner was just about laughed out of the park by the AICPA. State governments are being asked to pick up the regulatory slack under various “consumer protection” statutes. And needless to say, there will be more injured “Lori’s” in the world, with nothing being done about it. The licensed folks are still paying for additional registration while the bad guys are still here.
In conclusion, I’d like to say there is a happy ending, but there really isn’t any. It is nothing more than the predictable result of what happens when large commercial enterprises and acutely thrifty consumers move to their sides of the foul line. And with that, everything in between gets more muddied than ever.
Let us leave this article where we started: Choosing your proper tax professional. Assess the need you have in a candid and honest manner. Educate yourself, as the time you take now will save costly dollars later. Talk to several practitioners and ask them what is important to you. Consider whom, or what will be there for you should you have a need or an issue. Then, make your best choice. Competent and decent practitioners have a great service to provide and nothing to hide look forward to having these discussions with you- whether you become a client or not.