Tax Return Preparer Accountability Act of 2025

Bill Number

H.R. 1983

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-03-10: Referred to the House Committee on Ways and Means.

Last Updated

2025-12-17T09:06:31Z

AI-Generated Summary

Purpose of the Legislation

The Tax Return Preparer Accountability Act of 2025 aims to strengthen oversight of individuals who prepare tax returns by directing the Secretary of the Treasury to regulate them, similar to how other tax professionals are regulated. It also seeks to modernize Internal Revenue Service (IRS) technology to better identify taxpayers facing financial difficulties and to secure tax preparation software.

Key Provisions

• Regulation of Tax Return Preparers:
• Expands the Treasury Secretary's authority to regulate tax return preparers, including setting minimum competency standards such as obtaining a unique identifying number (like a Preparer Tax Identification Number, or PTIN), passing exams, completing annual continuing education, and undergoing background checks.
• Allows exemptions for preparers already meeting similar standards through state licensing or federal oversight, extending exemptions to their supervised employees who do not need their own identifying number.
• Defines a "tax return preparer" as anyone who prepares U.S. tax returns, claims for refunds, or related documents for compensation, using definitions from the Internal Revenue Code (IRC).
• Requires all prepared tax returns or refund claims to include the preparer's identifying number, with exceptions for those working under the direct supervision of licensed professionals like attorneys, certified public accountants (CPAs), or enrolled agents.
• Grants the Secretary authority to sanction preparers for misconduct, such as incompetence, dishonesty, or threatening clients, including suspending or barring them from practice.
• Permits the Secretary to revoke a preparer's identifying number after a hearing if they are found incompetent or disreputable, and to maintain records of such decisions to promote tax compliance.

• IRS Technology Updates:
• Requires the IRS to implement an automated algorithm to identify taxpayers at high risk of economic hardship (defined in future regulations), ask relevant questions during contact about owed taxes, notify those seeking payment plans of available resources, exclude high-risk cases from aggressive collection methods (e.g., wage levies, private debt collectors, or passport restrictions), and prioritize collection cases.
• Mandates the development and annual review of security standards for tax software providers to protect taxpayer data.

Significant Changes to Existing Law

• Amends Section 330 of Title 31, United States Code, which previously focused on regulating representatives appearing before the Treasury Department (e.g., in audits or appeals). It now explicitly includes tax return preparers in the regulatory scope, adding new subsections for competency requirements, sanctions, and definitions.
• Modifies IRC Section 6109 by requiring identifying numbers on all preparer-submitted documents (previously optional in some cases) and adding a new subsection for revoking numbers, effective for returns filed after enactment.
• Introduces entirely new IRS tools: an automated hardship identification system and mandatory security standards for tax software, which did not exist before.

Potential Impacts

• On Government Agencies: The IRS and Treasury Department will gain expanded regulatory tools and responsibilities, potentially increasing administrative workload but improving enforcement efficiency through automation and standardized preparer oversight. This could lead to fewer errors in tax filings and better resource allocation for collections.
• On Citizens: Taxpayers may benefit from higher-quality tax preparation services, reducing risks of errors, fraud, or overpayments caused by unqualified preparers. The hardship algorithm could provide faster relief options for low-income or struggling individuals, such as easier installment plans or paused collections, making tax compliance less burdensome.
• On International Relations: No direct impacts, as the bill focuses on domestic U.S. tax administration.

Main Stakeholders Affected

• Tax Return Preparers: Individuals and firms preparing taxes for others will face new licensing-like requirements, exams, and background checks, potentially raising entry barriers but professionalizing the industry (currently unregulated for many non-CPAs or attorneys).
• Taxpayers: Everyday filers, especially those using paid preparers or facing debt, will see improved protections and support.
• IRS and Treasury Department: Must implement and enforce new rules, conduct background checks, and develop technology.
• Tax Software Providers: Companies offering tax filing tools (e.g., TurboTax) will need to comply with annual security standards, which could increase costs but enhance data protection.

Notable Legal, Constitutional, or Political Implications

• Legal Implications: Strengthens tax enforcement by aligning preparer regulation with existing professional standards (e.g., for CPAs), potentially reducing IRS disputes over faulty returns. The revocation process includes due process (notice and hearing), minimizing arbitrary actions.
• Constitutional Implications: Background checks and data security rules raise minor privacy concerns under the Fourth Amendment, but these are standard for regulated professions and balanced by exemptions and oversight. No broad free speech or due process issues apparent.
• Political Implications: Promotes accountability in an industry criticized for aggressive marketing or errors, appealing to calls for fairer tax systems. It could face opposition from small preparers over added costs, but support from consumer advocates and the IRS for curbing noncompliance estimated to cost billions annually.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Cohen, Steve [D-TN-9]

Cosponsors (1)

Del. Norton, Eleanor Holmes [D-DC-At Large]

Recent Actions

• 2025-03-10: Referred to the House Committee on Ways and Means.
• 2025-03-10: Introduced in House
• 2025-03-10: Introduced in House

Bill Versions

• Tax Return Preparer Accountability Act of 2025 — issued 2025-03-10 — PDF (8 pages)