IRS Gains Power to Revoke Tax Preparer IDs; Tech Mandated to Shield Hardship Cases from Aggressive Collections

The Tax Return Preparer Accountability Act of 2025 is essentially a major federal intervention into the world of tax preparation, setting up a new layer of oversight and giving the Treasury Department serious regulatory muscle. It’s a two-part bill: one part is about professionalizing and policing tax preparers, and the other is about using tech to give financially struggling taxpayers a break from aggressive IRS collections.

The IRS is Now Licensing Your Tax Guy

Right now, many tax preparers operate with minimal federal oversight, but this bill changes that by expanding the Treasury’s regulatory reach to cover virtually every non-credentialed person who prepares your taxes (SEC. 2). If you’re a preparer, you’ll soon need to meet new minimum competency standards: that means passing required exams, completing annual continuing education, and undergoing a background check. The goal here is simple: fewer mistakes and less fraud, which is great for the average taxpayer who just wants their return filed correctly.

However, there’s a massive carve-out. If a preparer is already licensed and regulated by a state—think someone under a strong state program—they can be exempted from these new federal hoops. This is smart, as it avoids redundant bureaucracy for those already meeting high standards. But for the thousands of independent preparers who aren’t certified as CPAs or enrolled agents, this bill means new compliance costs and required time out of the office for testing and classes. The Treasury also gets the power to sanction preparers who mislead or threaten clients and, crucially, can now revoke a preparer’s identification number if they are deemed “incompetent or disreputable,” after a hearing. That’s a serious power hike for the government, and the definition of what exactly constitutes “incompetent” will be key to watching as the rules are written.

Tax Software Gets a Security Checkup

If you use software like TurboTax or H&R Block to file your taxes, or if your preparer does, Section 3 mandates that the Treasury must set and annually update information security standards for every company providing tax software. In an era where data breaches are common, this is a necessary move to protect sensitive financial information. It means the software you rely on should have a much higher bar for security, which is a win for anyone worried about identity theft.

Tech to Shield Taxpayers in Hardship

Perhaps the most immediate relief for struggling Americans is Section 3’s mandate for the IRS to implement new technology to identify taxpayers facing “high risk of facing serious economic hardship.” When these vulnerable folks call the IRS about a debt, the automated system must confirm their hardship status and direct them to available resources. More importantly, this system will decide if their debt should be excluded from aggressive collection efforts, such as the Federal Payment Levy Program or passport certification holds.

Think about the single parent juggling two jobs whose car breaks down and suddenly can’t pay a tax bill. Under this system, instead of immediately having their bank account levied or their passport held, the IRS technology is supposed to flag them for relief. This is a huge shift toward compassionate collection, using technology not just for enforcement, but for taxpayer protection. The success of this provision, however, hinges entirely on how accurately the IRS designs the algorithm to spot true economic hardship—if the net is too narrow, many people will still fall through the cracks.