Tax Return Preparer Accountability Act of 2025
Tax Return Preparer Accountability Act of 2025 would expand regulation of the tax system to explicitly include tax return preparers, not just representatives of persons before the Department of the Treasury. It would require minimum competency for preparers (identification numbers, licensing-style exams, ongoing education, and background checks) and give the Secretary of the Treasury authority to sanction preparers who fail to meet standards or who mislead clients. The bill also strengthens oversight by allowing rescission of a preparer’s identifying number for incompetence or disreputable conduct. In addition, the bill directs the Internal Revenue Service to implement technology upgrades, including an algorithm to identify taxpayers at risk of economic hardship and to tailor outreach and protections (such as preventing certain debts from automated collection) and to establish security standards for tax software providers with annual updates. Overall, the measure aims to improve the accuracy and integrity of tax filings and consumer protections, while imposing new regulatory and technical requirements on preparers and software providers.
Key Points
- 1Regulation extended to tax return preparers: The act broadens the existing framework (title 31 U.S.C. § 330) to regulate the practice of tax return preparers in addition to other representatives before the Department of the Treasury.
- 2Minimum competency standards for preparers: New subsection requires preparers to obtain an identifying number, pass examinations, meet annual continuing education requirements, and undergo a background check. Some preparers already subject to comparable state licensing or federal examinations can be exempt, including staff supervised by exempt preparers.
- 3Sanctions and conduct rules: The Secretary gains authority to sanction regulated tax return preparers who mislead or threaten clients or who are otherwise noncompliant, with expanded provisions to protect both current and prospective represented parties and documents.
- 4Identifying numbers and enforcement: Returns and claims for refunds prepared by a tax return preparer must bear an identifying number. There are exemptions for certain supervised preparations, and the Secretary may rescind an identifying number after due process if the preparer is incompetent or disreputable; records of such determinations must be maintained.
- 5Effective date and scope: Amendments related to identifying numbers apply to returns filed after enactment. The rescission and background-check provisions establish ongoing oversight of preparers.
- 6IRS technology updates on hardship and collection: The IRS must implement an automated algorithm to identify taxpayers at risk of economic hardship, prompt questions during balance matters, notify hardship-affected taxpayers about available resources for streamlined installment agreements, and decide whether to exclude debts from certain automated collection programs (e.g., Federal Payment Levy Program, private debt collection, passport certification) while prioritizing collection cases.
- 7Information security for tax software: The Secretary must issue regulations to set information security standards for all tax software providers, with annual updates to standards.