Tax advocacy: AICPA experts on new bills shaping tax preparer rules

Sponsored by Thomson Reuters

Two AICPA tax experts from the Washington, D.C., office joined the JofA podcast to discuss a recent Government Accountability Office report on paid tax return preparers and why its findings matter during a busy filing season.

Melanie Lauridsen, vice president–Tax Policy & Advocacy, and Todd Sloves, director–Congressional & Political Affairs, break down bipartisan legislation in Congress — including the TAS Act — and explain how its provisions could strengthen oversight and modernize IRS processes. The conversation also highlights the SAFE Act and its aim to simplify the task of filing extensions for taxpayers and practitioners.

The Q&A also outlines where broad consensus exists in the tax community and why this moment could be pivotal for long‑awaited tax administration reforms.

What you’ll learn from this episode:

• What the statistics in a GAO report on paid tax return preparers show.
• How minimum professional standards could strengthen IRS oversight, and why the AICPA supports establishing competency and regulatory guardrails for all preparers.
• Provisions in the TAS Act recently introduced in the Senate, including reforms shaped by bipartisan work and those aimed at improving taxpayer service.
• Lauridsen’s explanation of how the SAFE Act would simplify filing extensions, reducing the need for complex estimates.
• A reminder of the particulars of the “mailbox rule.”
• The factors Sloves cites in his belief that the discussed legislation has a path to passage.

Play the episode below or read the edited transcript:

— To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome back to the Journal of Accountancy podcast. This is Neil Amato with the JofA. It is mid-March. It is about a month before the individual tax filing date. We’re going to talk about many aspects of tax filing and some of the reports out there, some of the legislation out there that matters to our members. You’ll hear that conversation right after this brief sponsor message.

[Sponsor message]

Welcome back to the show. I’m happy to be joined by two guests from our D.C. office: Melanie Lauridsen, vice president–Tax Policy & Advocacy, and Todd Sloves, director–Congressional & Political Affairs. We’re going to talk about a few reports and legislation that I mentioned in the intro, Melanie and Todd, welcome to the JofA podcast.

I’m going to start with this. A GAO report — that’s Government Accountability Office report — about paid tax preparers is something that I believe caught your eye. It caught my eye. That report is titled Paid Tax Return Preparers: Opportunities Remain to Improve IRS Oversight. First, I guess for Melanie, what is your summary of the report?

Melanie Lauridsen: Neil, the report actually is a report that has come out in the past, and now it’s a report with updated numbers about what is happening in the tax preparer community. It is taking a look at the paid tax return preparers and how they are doing tax returns and what implications and impacts it is having on taxpayers. There are some really interesting tidbits that this report has [brought] forward, and it really outlines the essential role that a paid tax return preparer takes in preparing tax returns and helping taxpayers prepare tax returns.

Amato: Some of the opening words in that report drove home why this topic matters, to me at least. It said that more than half of all individual taxpayers, I think 57%, relied on paid tax return preparers to assist them in meeting federal filing obligations. I guess that was in the 2024 fiscal year. Tell me a little bit more about why this is a big deal to you and some of the other numbers in the report that stood out.

Lauridsen: That 57% equates roughly to about 85 million tax returns that are done through paid tax return preparers. But when you take a look at that makeup, the majority of those paid preparers are unregulated. What unregulated means is that they’re unenrolled, they’re not subject to competency testing, they’re not subject to educational testing or even suitability standards.

You really just don’t know what you’re getting necessarily in a paid tax return preparer. The CPA brand, obviously, that carries the weight from the education requirements and the ethical components that they work under. But the unregulated, you just don’t know. Because of that, what the Government Accountability Office has discovered is that there are common and high error rates, especially among those unenrolled preparers, and those errors create complications not only for just the IRS, but also for the taxpayers.

And sometimes they can be quite severe and it continues. It could be billions of dollars of impact in those refund credits that are erroneously given. You think about some of the errors that happen, you think about the [employee retention credit] mills that were coming about and all the debacle that happened that came forward from that, and we’ve seen the consequences of that. It really is an important area to be able to focus and try to come up with some minimum professional standards for tax return preparers.

Amato: That phrase “minimum professional standards” is one we’ll return to in just a bit. What are some of the GAO recommendations to improve IRS oversight, and what is your opinion of the recommendations — or the AICPA’s position on them?

Lauridsen: The AICPA has a long-standing position with regards to the regulation of tax return preparers and it does align with establishing a minimum professional standard for all preparers. Now, you may ask why this matters, because if you look at CPAs, we are credentialed very differently. We’ve talked about the educational requirements. We’re bound by a code of conduct, but we’re also bound by Circular 230.

There’s a lot that goes into being a CPA and that brand. But still, when you take a look at taxpayers, there’s different needs of different types of returns that get prepared, and of course, different types of preparers who can serve that need. There’s a lot of work out there for all types of return preparers. But there does need to be someone who can regulate it and who has the authority to regulate it.

If you start getting a little bit more complicated, prior to the Loving case, which we’ve discussed in the past, that was the case that said that the IRS did not have the authority to regulate. Its implications, if you look at what is happening now, anybody can walk off the street and say they want to prepare a tax return, and all they need to do is sign up for a PTIN. So they pay a very minimal fee, they get a number associated to them, and they can hang their hat out there as a preparer, and they can start preparing tax returns.

As you know, tax returns, the information that’s on it has the Social Security number, the home addresses, the dates of birth. It’s really highly sensitive information and it could literally be anybody walking off the street to prepare a tax return. There does need to be regulation, but that regulation also needs to come with guardrails.

Amato: Again, we’re recording March 11 for publication Thursday, March 12. That’s right in the heart of tax filing season. Tax prep clearly a big deal. One other thing we want to talk about, I guess, is how it ties into the TAS Act, the Taxpayer Assistance and Service Act. That’s been introduced in the Senate. Tell me more about the TAS Act.

Todd Sloves: Listeners may recall that back in January of 2025, a discussion draft was put out by a bipartisan duo, the leaders of the Senate Finance Committee, which has jurisdiction over the IRS and tax policy generally. That’s Sen. [Mike] Crapo from Idaho and Sen. [Ron] Wyden of Oregon, Republican and Democrat.

The leaders of that committee teamed up, and they put out the discussion draft for comment from various individuals or organizations, and the AICPA worked really closely with the committee in developing that legislation to ensure that some of the key things that we have advocated for ended up in that bill as well. What was finally introduced — that is, they actually had the bill put into the Congress and published by the clerk — is the culmination of the feedback that they received. This is now live legislation. It could be moved through the legislative process.

Lauridsen: It’s very exciting, Neil.

Amato: I mean, it is exciting. We’ll link to our Journal of Accountancy news article on that Senate bill. We posted that article March 2. There’s a lot of links just in there to the legislation, to the AICPA’s position on it.

It is a broad reform package. Are there any particulars in that legislation that you think you’d like to mention for our members?

Lauridsen: Within that package, we were just talking about that GAO report. But within that package is the actual legislation to regulate tax return preparers, and it does exactly what the GAO report is recommending, which is establishing some minimum professional standards within it. That piece of legislation is actually a piece of legislation that not only do we support it, but generally and broadly speaking, the preparer community also supports it because it does give the authority to the IRS to revoke a PTIN.

But like I said, it needs guardrails and it also gives the ability — so if for whatever reason your PTIN was erroneously revoked, there are methods and ways to be able to get it back because ultimately that PTIN is the livelihood and giving you the ability to prepare tax returns. It has those guardrails in place, and it also lays out the minimum competency standards and things that are needed in order to prepare tax returns. For example, you must pass a background check. If you’re a con artist who’s been in the system a few times, you wouldn’t be able to hang your hat out as a return preparer. It’s just good guardrails, some commonsense things in it, too.

Sloves: Let me just add that when Melanie talks about the preparer community being supportive this, we’re talking about everyone from the legacy Circular 230 preparers, like the enrolled agents and CPAs obviously, but also the NATP, the National Association [of] Tax [Professionals], who represent those individual preparers, a coalition of the franchise preparer companies, and companies that do online tax prep.

This is broadly supported by everyone who would engage in this. I think that goes to tell you that this is really a consensus moment for making sure that we provide just some minimum level of competency and standards at the end of the day to help the taxpayer.

Amato: That’s great. Thank you for that. We’ve talked about the GAO report, we’ve talked about the TAS Act. How does the TAS Act tie into something called the SAFE Act? There’s one of several SAFE acts, and that’s not to be confused with the SAVE Act. SAVE relates to voting, SAFE: Simplify Automatic Filing Extensions Act. Tell me more about that.

Lauridsen: Neil, that’s actually a really important provision that a lot of our membership really can get behind and cares about. Essentially, when it comes down to the time of an extension with somebody’s tax return — and you can do an extension for various reasons — in order to prepare that extension, you essentially have to prepare the entire tax return with missing pieces.

Sometimes you have estimated pieces or you just don’t have certain information that’s finalized, and so you do the best that you can to prepare a tax return with all these other pieces to come up with a number to then be able to file an extension. What the SAFE Act does is say, “You know what? You don’t have to do all those complicated calculations.” You can look at prior year’s return. You can pay in 125%, and it will be a safe harbor from penalties for underpayment, estimated penalties.

It just covers you and the client to be able to just do a simple calculation, get that extension out, and then prepare the return appropriately once you get the full date and information to come in.

I’m going to share a quick little story here. I once had a client who forgot to mention some information, which didn’t go into the extension, but more egregiously, he got a 1099 that was estimated. When that 1099 came back and then we picked up the piece of income he had, it swung his tax return by over $100,000 of tax owed. There were some, as you can imagine, penalties associated with that. That, for the best amount of work that we can do, we were working based off of estimates that were provided to us, legitimate estimates.

It becomes complicated and difficult and sometimes painful for the taxpayer, and they don’t even understand why because they’re like, we gave you that information. Why did this happen? This really helps simplify that time. As you can imagine, filing season April 15 is so complicated and you have so much work anyways that extensions naturally occur. This could alleviate that burden.

Amato: Melanie, thank you for that. We’ve talked about this legislation, but it’s not signed yet. For Todd, any other provisions you’d like to discuss or any predictions on the likelihood of this legislation passing?

Sloves: Yeah. Like I said, we worked with the committee on a number of these provisions. Another big one is what’s known as the mailbox rule. What that essentially would do is it would allow for electronic communication sent into the IRS to be, for lack of a better term, postmarked for the date that they’re received versus opened by someone over at the IRS, which aligns with how the IRS handles physical mail.

There’s a lot of these technical fixes in the bill. But what I would say is that not only is this a bipartisan bill, but it’s got a broad base of support amongst members of Congress, both in the House and the Senate. In fact, some folks might recall that there were little pieces of individual tax administrative fixes that the House had passed early last year and that the Senate just kind of what they call “hotlined” through via unanimous consent, and those [pieces] randomly got passed into law. What we’ve got here is a bill that’s chock full of provisions like that.

I think now that it is out there, which was in and of itself a hurdle. Some of the staff that put this bill together have been working on this for the better part of 25 to 30 years. Now that that’s out there, I think the question will be, will there be hearings? Unclear if there might be what we call a markup, which is where the committee considers the bill, maybe makes amendments.

But I think as with many things in Congress, the best way to get something passed is to hop on a train that’s leaving the station. We might want to keep an eye on things like massive budget or appropriations bills or omnibus bills at the end of the year, something where, because the Senate is so limited in the amount of time it has to debate individual bills, they like to throw some things together that have broad support so that they can expedite the consideration of those things.

Given the broad support that this has, I think we could possibly see it start to move. I think this is our best shot to get some of the stuff done that many people have been trying to get done for, like I said, 20 or 30 years now.

Amato: Wow, yes. Definitely some history to this bill. Thank you for bringing it to the current day and the current issues that taxpayers and tax preparers face. Todd Sloves, Melanie Lauridsen, thank you for your time and insight on the Journal of Accountancy podcast.