MELISSA BLOCK, host:
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The Internal Revenue Service is taking aim at the tax preparation industry. Many Americans use tax preparers to do their returns, but there are no federal standards or competency tests. The IRS says that has to change. It announced rules today, and NPR's Wendy Kaufman joins us to talk about them. And, Wendy, there a lot of different kinds of tax preparers. Who exactly is it that the IRS is targeting here with these rules?
WENDY KAUFMAN: Well, Melissa, you know, the tax preparation industry is huge and it's growing. And it turns out that about 60 percent of us use paid preparers, and in many cases, those preparers aren't regulated at all. So you've got everything from tax lawyers and CPAs to the guy who hangs out a shingle in March and disappears a few weeks later. The IRS wants to crack down on the shoddy operators or those who are simply incompetent.
BLOCK: And crack down how exactly?
KAUFMAN: Well, here are what some of the new rules are going to look like. Tax preparers are going to have to register with the federal government and get an ID number. In general, everyone except lawyers and CPAs will have to pass competency tests, and they're going to have to take continuing education courses. And they're going to have to comply with ethics rules that currently don't apply to them.
BLOCK: And how many tax preparers is this likely to affect, do you think?
KAUFMAN: The IRS says about a million preparers will be covered. And the government's hope here is that the new rules will help ensure the integrity of the tax system, consumers will be more likely to get accurate, honest advice, the government will hopefully collect what it calls the appropriate amount of tax. By the way, the government isn't saying if it expects more tax revenue or less tax revenue, but the appropriate amount.
I should say here, Melissa, that these rules are a huge change for the federal government, which has never attempted to adopt regulations, anything like this in the past. So it's a huge step on the part of the IRS.
BLOCK: Yeah. And when would these new rules go into effect?
KAUFMAN: Well, the rules will not go into effect for the coming tax season. They're going to be taking some time to be implemented. But the IRS is stepping up its oversight of the industry. And in some cases, this can be actually going undercover to check out some of these guys.
By the way, Consumers Union sees these rules as a big first step in getting rid of bad actors. H&R Block, the largest tax preparation company in the country, said it too viewed the rules as a positive step. So we're coming a long way, it looks like, at least from the IRS' perspective.
BLOCK: Undercover tax work. I like that. Wendy, if the new rules, as you say, are not going to be in effect for the coming tax season, what does the IRS say that taxpayers should be on the lookout for in the meantime as they get their taxes done?
KAUFMAN: Well, it raised a couple of potential big red flags that consumers should take note of. One would be any tax preparation company that says to you in advance they're going to get you a big, giant refund. And the other big red flag they mentioned was that you should avoid any tax preparer whose fee is based on a percentage of any tax refund that you're entitled to.
BLOCK: Okay, Wendy, thanks so much.
KAUFMAN: You're welcome, Melissa.
BLOCK: That's NPR's Wendy Kaufman.