Vanaski: Test for preparers not so taxing
If you fret enough about your income taxes that you pay someone else to do them for you, this isn't what you want to read.
Officials from the Government Accountability Office reported this week that they visited 19 paid tax preparers and found that 17 of them made “significant errors” on returns, including failing to report tips and wrongly claiming children for an Earned Income Tax Credit.
A glass-half-full person might say things are looking up since 2006, when all 19 paid preparers sampled made some type of mistake.
But the fact is that by the GAO's calculations, paid tax preparers had a higher percentage of errors than those completed by individuals — 60 percent to 50 percent. Maybe that's why the IRS asks for their phone numbers on returns, too.
What the GAO is asking for is authority from Congress to regulate all paid tax preparers. Attorneys, CPAs and enrolled agents — who are licensed by the IRS — fall under federal regulation. All others, including those storefront guys, have an easier path to charging you a couple hundred bucks to do your taxes.
To be an enrolled agent, you need to file for a Preparer Tax Identification Number and pass all three parts of the Special Enrollment Examination, which tests your knowledge of tax law. Here's a true-or-false sample question:
“James is 28 years old, single and has no children. He lives at home with his parents. He works as a part-time truck driver. His income for 2004 was $6,050. He also has interest income of $200 from a savings account. James is entitled to $390 earned income credit for 2004.”
You'd think true-or-false questions wouldn't be so hard, but then you have to understand the dynamics of the question if you want to be approved to prepare someone else's taxes.
Others can take a different avenue to becoming a tax preparer. For example, H&R Block preparers file a tax identification number, but they take a company-created online test and course.
Here's a sample question: “Which one of the following is an example of a casualty and/or theft loss?
a) Termite damage; b) Misplaced property; c) Damage or loss from a terrorist attack; d) Property broken through ordinary use.”
Ah, multiple choice — the true measure of a man. Let's say option C doesn't jump out at you. Don't worry — there's an IRS document called, “Your Federal Income Tax” attached to the test to help you find all the answers in the allotted hour. The test and its answers also can be found online on several websites.
H&R Block spokesman Gene King said that the company has both enrolled and unenrolled preparers at its locations. People it hires as tax preparers must complete 75 hours of training in tax law and return preparation in the first year on the job, then 15 hours of continuing education and 35 hours of skills training in the following years.
Not bad — unless you get a first-year guy. Then both of you may want to read your instruction booklet together.