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In 2004, I started my own financial planning and tax-preparation business in Manhattan. While I’ve since moved across the river to Hoboken, for the last eight years I’ve provided a one-stop comprehensive service to my clients. Thanks to our higher state and local tax rates, plus the negative tax implications of the area’s higher cost of living, New Yorkers and New Jerseyans often need to hire a tax preparer like me who can help them optimize deductions and exemptions.
But they may be out of luck, thanks to a sweeping new IRS licensing scheme, which could force countless businesses like mine to close.
To continue preparing taxes, independent preparers like me will first have to get permission from the IRS. We’ll need to pass a licensing exam, pay fees and endure an endless series of continuing-education courses.
All this only serves to raise prices and reduce choice. It’s classic crony capitalism, as large and well-funded companies like H&R Block supported the regulations, and interest groups like the American Institute for CPAs got the IRS to exempt their members and employees — while small-business owners got left behind.
The IRS claims it’s protecting the consumer, but as a guy who’s spent a lot of time correcting the mistakes of CPAs and mass-production tax-prep firms, I disagree. Consumers facing higher prices and less choice won’t welcome this “protection.”
According to the IRS, unlicensed tax preparers lack the knowledge to competently prepare tax returns. Well, I have a BS and MS in engineering from MIT; if I can’t figure out how to prepare a tax return after doing it for eight years, maybe the IRS should instead focus on simplifying the tax code.
I have a client who is a corporate attorney. Beginning next year I can no longer prepare his taxes, but he can prepare mine. Likewise, I’ll be “less qualified” to prepare taxes than a new H&R Block employee, though I’ve spent eight years studying federal, state and local tax codes and preparing returns for my clients.
Tax preparers have a right to earn an honest living. Their clients have a right to hire them, instead of being forced to hire an expensive lawyer or tax-prep factory. My clients, not the government, know what serves their best interests.
The market serves as my ultimate regulator. If a client isn’t satisfied, he or she simply leaves. Freedom and choice are what ensure quality.
To top it off, the scheme is illegal: The IRS issued this rule without congressional authorization, grabbing powers that Congress hasn’t granted it. Therefore, I asked the Institute for Justice to represent me. Our lawsuit, filed yesterday in federal court, aims to stop the IRS from further interfering in our lives and needlessly putting people out of work.
Next week, my son turns one. I hope that, on top of being healthy and happy, he’ll live in an America where he doesn’t need to ask the government permission to earn an honest living.
John Gambino is the president and founder of Inner Circle Advisors LLC, a tax-prep firm.