Despite support from low-income advocates, the Senate Finance Committee last week rejected legislation to require paid tax return preparers to meet a basic standard of competence. The provision, which was offered by Senator Ron Wyden (D-OR) as an amendment during the committee’s April 20^th markup on a bill to prevent identity theft and tax refund fraud, failed (12-14) on party lines. The issue is of concern for low-income taxpayers and advocates because most tax returns, including those claiming the Earned Income Tax Credit, are prepared by paid preparers, and nearly three-quarters of these paid EITC preparers are unregulated. In fact, only four states require preparers to meet tax education and competency standards, and about 400,000 preparers who prepare more than 13 million EITC claims each year never have to pass any test to certify that they know the tax rules or to take any training on changes in tax rules. A new report suggests these unregulated paid preparers also seem to target low-income taxpayers, noting that zip codes with the highest level of EITC filers have approximately 75 percent more tax preparers per filer than zip codes with fewer EITC filers. Supporters of the amendment hope it might come up at some other time; at least two Republicans on the committee indicated they may be open to working on it at another time, but expressed concern that the underlying bill wouldn’t pass the full Senate with the amendment attached. For more information on this issue, visit the Consumer Federation of America and the Progressive Policy Institute.

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