Preparer Regulation and Judging Preparers Based on Size of Refund

A sad fact of being a tax pro is that a certain percentage of your clients will judge you based on how big of a refund you get them, as opposed to your knowledge and expertise.

Anyone who’s worked in this business has experienced the irate client who thinks the preparer screwed up because their refund was less than their friend/co-worker/hair dresser, etc.

But is this a reason to regulate tax preparers?

The National Association of Enrolled Agents seems to think it is. Here’s a quote from last July’s “EA Journal” published by NAEA:

Let’s Face it. In far too many instances, return preparation is a “race to the bottom” where taxpayers judge their preparers by the size of the refund they generate, not by the accuracy of the return. Because of this race for the bottom, amongst other reasons, NAEA has long supported the notion that IRS should have a cop on the beat.

I have written in many blog posts about how I disagree with NAEA’s stand on preparer regulation. But in this post, I’m focusing on the part about preparers being judged based on the size of refund.

I agree with NAEA that this is a problem. But I disagree that the solution is to require licensing of preparers.

The source of the problem is that the public doesn’t understand how taxes work. And the source of that problem is two-fold: 1) the complexity of the tax code and 2) (perhaps to a lesser extent) refundable tax credits that people don’t understand but that they become addicted to.

Those problems need solutions. But requiring preparers to have licenses isn’t a part of the solution.