Tax Professional Groups Fear Conflicts of New IRS Office Merger

Tax professional advocates are cautiously keeping an eye on a new merger of two units at the IRS.

The IRS Monday said it would unify two offices for tax professionals under one umbrella, creating the Tax Professional Management Office. It’s a decision that fell short of worries that the agency would fully combine administrative and enforcement functions for tax preparers.

While the IRS didn’t completely combine the Return Preparer Office and Office of Professional Responsibility, there are open questions about how it will work in practice.

Critics including former IRS officials and tax pro groups say separate offices help prevent confusion for taxpayers understanding the qualifications of their preparer and avoids potential conflict of interest for tax professionals seeking an appeal. The effort comes amid an uptick in dodgy and unethical tax preparers who falsify or inflate tax breaks.

“It sounds like they aren’t interested in enforcement at all,” said Sharyn Fisk, a former director of the Office of Professional Responsibility. She added it could cause a proliferation of tax shelters if preparers don’t think there will be consequences.

Both offices also lost over a quarter of their workforce to Elon Musk’s Department of Government Efficiency incentives to leave the government.

The IRS didn’t respond to a request for comment.

Lines Blur

The IRS said in its announcement Monday that the reorganization will not change the distinction between credentialed tax professionals and uncredentialed tax preparers, and the offices will operate independently.

Scott Artman, the CEO of the National Association of Tax Professionals, said his group is focused on making sure the responsibilities of both offices “remain clearly defined and independently administered.”

Distinguishing between the two offices will remain important for taxpayers looking for help with their returns, the tax professional advocates said. Over 45.8 million of electronic tax returns were filed using the help of a professional, according to the IRS.

“I’m optimistic from what they said that they would be maintained separate because we don’t want the lines to blur and further confusion between the requirements of those different types of preparers,” said Melanie Lauridsen, American Institute of Certified Public Accountants vice president of tax policy and advocacy.

Lawyers, enrolled agents, and certified public accountants are subject to Circular 230, a publication that provides guidance on practicing before the IRS and which the Office of Professional Responsibility oversees. Other preparers aren’t subject to the ethical constraints enforced by the IRS.

The separation of the offices also can stave off conflict-of-interest concerns for the application process of certain preparers. If someone gets denied by the Return Preparer Office, they can appeal to the Office of Professional Responsibility and a perceived influence over the process would undermine the office’s credibility, Fisk said.

“It’s just a matter of waiting and seeing how all this will net out,” Lauridsen said.