IRS gets ahead of itself on tax pro regs

It looks like Washington, D.C., road crews need to build a U-turn lane in front of the IRS headquarters on Constitution Avenue. For the second time this month, the agency has done a 180 on an issue.

First there was the cell phone taxation issue, which the IRS backed off of after much public outcry.

Now it seems that the agency got a little bit ahead of itself when it comes to possibly tougher regulations of paid tax preparers.

Apparently, the IRS issued a request for proposal, or RPF, in government acronymese, soliciting quotes for the development of a self-regulating body to oversee tax return preparers.

Uh-oh. Not really a good idea while you're still officially in the information gathering stage, as I blogged in Tax pros, prepare for more IRS oversight.

According to the tax publication Tax Analysts, the IRS reportedly sent the RFP to five government consulting firms just days after Commissioner Doug Shulman had announced that the agency would study the
regulation of return preparers with a goal of implementing any possible regs by year's end.

"The RFP not only took stakeholders by surprise," reports Tax Analysts, "it also
surprised Service leadership, who quickly withdrew it and contacted the
affected service providers late last week"

The RFP reportedly was sent to Booz Allen Hamilton, Deloitte, Grant
Thornton, IBM, and PricewaterhouseCoopers.

BNA's Daily Tax Report first broke the story and reported that the IRS was seeking a service provider to "define, design, and stand-up a self-regulatory
organization (SRO) with oversight and authority to create, amend,
implement and enforce quality and conduct standards, provide training
and or education, efficiently resolve disputes through alternative
dispute mechanisms, and/or certify tax practitioners, preparers or
other agents in the tax preparation and software provider industries."

Making up is hard to do: An IRS spokesperson said the employee responsible
for issuance of the RFP "has been removed from the team working on the tax
preparer project."

In addition, to ease tax practitioner concerns that the IRS already has a regulatory system just waiting in the wings, it's expected that Shulman will specifically reach out to that group for its ideas before making any specific recommendations, again by the end of this year.

"I am deeply troubled that this RFP was sent from the IRS, and it does not represent the mandate that I have given the team," Shulman said in a statement about the premature RFP. "My commitment to open dialog with all interested parties remains firm, and all options remain on the table."