The "Tax Return Preparer Accountability Act of 2025" aims to regulate tax return preparers through mandatory registration, competency standards, and background checks, while also modernizing IRS technology to better identify and assist taxpayers facing economic hardship and to bolster information security standards for tax software providers.
Steve Cohen
Representative
TN-9
The Tax Return Preparer Accountability Act of 2025 aims to regulate tax return preparers by requiring them to have an identifying number, meet examination and continuing education standards, and pass a background check. It also mandates that all tax returns and refund claims prepared by tax preparers include the preparer's identifying number. Additionally, the Act updates the IRS's technology to identify taxpayers at high risk of economic hardship and requires the Secretary of the Treasury to issue and update information security standards for tax software providers.
Tax Preparer Overhaul Bill Could Mean Stricter Rules, Better IRS Tech: The Tax Return Preparer Accountability Act of 2025
The Tax Return Preparer Accountability Act of 2025 is basically a two-pronged approach to shaking up the tax prep world. First, it's about tightening the reins on who can prepare your taxes. Second, it aims to drag the IRS's tech into the 21st century, especially when it comes to helping taxpayers in a financial bind.
Tax Prep: New Sheriff in Town
This section is all about regulating tax preparers. Think of it like getting a license to cut hair, but for doing taxes. The bill mandates that all paid tax preparers get an official ID number, pass an exam, take continuing education courses, and even go through a background check (SEC. 2). There are some exceptions – if you're already a lawyer, CPA, or enrolled agent, or if you work under one, you're probably off the hook.
- Real-world impact: Imagine you're a freelance graphic designer who uses a local tax preparer. Under this law, that preparer must be registered and meet certain standards. This could mean more reliable service, but possibly higher prices if the new requirements increase their costs.
- The flip side: What if you're a retired accountant who helps out friends and family with their taxes for a small fee? You might now have to jump through a bunch of hoops, which could make it harder to offer that help.
The bill also gives the Secretary (likely the Treasury Secretary) the power to yank a preparer's ID number if they're deemed "incompetent or disreputable" (SEC. 2). This is supposed to improve tax compliance, but it's a pretty broad power, and the bill requires documentation of the reasons for taking such action.
IRS Tech Upgrade: Spotting Hardship, Beefing Up Security
The second part of the bill focuses on the IRS. It wants the agency to use an automated system to flag taxpayers who are at "high risk of economic hardship" (SEC. 3). When these folks contact the IRS about owing money, they're supposed to be asked about their situation and pointed to resources that might help. This also affects things like the Federal Payment Levy Program (where the government can take money from your paycheck) and private debt collection.
- Real-world impact: Let's say you're a construction worker facing unexpected medical bills. If the IRS flags you as high-risk, you might get more leeway in setting up a payment plan or avoiding harsh collection tactics.
- Potential snag: Automated systems aren't perfect. There's always the risk of someone being misclassified, either missing out on help they need or getting flagged when they shouldn't be.
Finally, the bill tackles tax software security. It requires the Treasury Secretary to issue regulations for all tax software providers, ASAP, and to update those rules every year (SEC. 3). This is all about protecting your sensitive financial data.
- Real-world impact: If you use online tax software, this should mean better security for your personal information. However, it could also lead to higher prices for those services if the new security standards are costly to implement.