U.S. Bill Seeks to Regulate Tax Preparers – A Global Shift in Oversight?

The U.S. Congress is once again considering stricter oversight of tax preparers, with reintroducing the Tax Return Preparer Accountability Act (H.R. 1983). If passed, the bill would grant the Internal Revenue Service (IRS) authority to regulate tax preparers, a long-standing goal that has faced legal obstacles in the past.

New Proposed Provisions

1. Mandatory Competency Standards for Tax Preparers

   • The IRS would be authorised to set minimum standards for individuals preparing tax returns for compensation.

   • This could include mandatory training, exams, and continuous professional education to ensure accuracy and integrity.

2. Revocation of Identification Numbers for Non-Compliant Preparers

   • The IRS would have the power to revoke the Preparer Tax Identification Number (PTIN) of tax preparers who are found to be non-compliant or fraudulent.

   • This measure aims to remove unethical or incompetent practitioners from the tax preparation industry.

3. Automated IRS System to Identify Taxpayers at Risk of Economic Hardship

   • The bill proposes an automated system that would detect taxpayers facing financial difficulties.

   • This could lead to better-targeted tax relief measures or prevent aggressive tax collection actions that could harm vulnerable individuals.

4. Enhanced Security Measures for Tax Software Providers

   • All tax software providers would be required to follow strict security controls and regularly update their systems to prevent fraud and data breaches.

   • Given the rise in tax fraud schemes and cyber threats, this aims to protect both taxpayers and tax professionals from identity theft and financial loss.

What This Could Mean for South Africa

The U.S. government’s push for tighter regulation of tax preparers mirrors trends seen in other countries. For South Africa, where SARS has been ramping up compliance measures, this raises important considerations:

• Could SARS introduce similar competency requirements?

  Currently, South African tax practitioners must be registered with SARS and a Recognised Controlling Body (RCB), such CIBA. There are minimum qualification and experience requirements set for tax practitioners. However, there are no standardised competency exams all tax preparers—something this bill seeks to address in the U.S. The Tax Practitioner Readiness Programme currently in place only covers the administrative requirements for tax practitioners.

• Will SARS implement stricter oversight on tax practitioners?

  SARS has increasingly emphasised clamping down on tax fraud and unethical practitioners, with recent crackdowns on VAT fraud and illicit financial activities. The U.S. model could serve as a blueprint for SARS to introduce stricter qualification and integrity measures.

• The push for enhanced tax software security

  As South African tax compliance moves further into the digital space (e.g., eFiling, automated assessments, and third-party data collection), tax software providers could face tighter cybersecurity regulations similarly to what is being proposed in the U.S.

Final Thoughts

While the U.S. bill is still in its early stages, it signals a growing international push for more accountability in tax preparation services. South African accountants and tax practitioners should take note, as SARS may follow suit with its own stricter compliance measures in the future.

Would increased regulation improve the integrity of tax preparation in South Africa, or would it create unnecessary red tape for compliant practitioners? Let us know your thoughts.