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Judge blocks IRS from helping H&R Block squish the competition

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POSTED February 5, 2013 12:42 a.m.

There is nothing more dreadful than the IRS in terms of confusing heavy-handedness.

But the IRS teaming up with big corporations takes bullying to a new level.

Thanks to the Institute of Justice and District of Columbia federal judge James Boasberg, Americans have been spared a merger between the tax world equivalent of Satan and his disciples.

The IRS – at the prodding of H&R Block and Intuit – tried to make it illegal for anyone but tax preparers licensed by the federal agency to prepare your taxes. It conveniently excluded accountants.

That is an important detail since most folks – people that make real money – and businesses use accountants to do their taxes.

The IRS policy that was blocked in court would have required costly licensing of tax preparers. That would have put mom-and-pop tax preparers out of business.

And since only individuals who aren’t exactly flush and don’t need to access all 10 million pages of tax code gibberish would use mom-and-pop tax preparers, it is clear that the big guys were trying to put them out of business using the IRS as the hammer.

It should be noted if anyone should be put out of businesses or at least regulated much more heavily it is the big guys.

They have put in place – and effectively marketed – tax refund advance payments. The charge for the advance would make a check cashing operator flush and your corner loan shark envious.

Not only do most refund checks come within a month or so of filing, but the big guys never do anything to reduce the taxpayers’ excess withholding for the next tax year. That’s because it is in their best interest to continue to have the government take more out of the paychecks of working stiffs so they can make tons of money off tax refund advances.

It is why stock in H&R Block and other big tax preparers have skyrocketed in recent years.

H&R Block and their ilk essentially work in unison with the federal government to milk people of their hard earned cash. Uncle Sam benefits by getting too much money from withholding throughout the year. The government can use that cash without paying taxpayers interest before returning it to them.

Of course, the tax preparers make tons of money by charging fees for advancing refunds. It just looks like you’re getting a good deal when they say they prepare your taxes for free.

The judge noted Congress and not the IRS should determine whether tax preparers should be licensed. Congress, for the record, has rejected such a notion at least six times. Obviously the IRS tried to make an end run around duly elected representatives.

The IRS also showed a complete disregard for the welfare of taxpayers.

First, the proposed rule did not require background checks. It isn’t uncommon for tax preparers – even the big guys – to hire seasonal employees who have questionable backgrounds. In Manteca some 15 years ago one big chain tax preparer had hired someone who spent time in prison for embezzling from a bank. The IRS did not care about such issues when it wrote the proposed rules that were struck down. They didn’t want to protect taxpayers but wanted to strengthen the bottom line of big corporations.

Then there is the issue of the IRS itself. Most people who use tax preparers really don’t have complicated finances or tax issues. But thanks to the way the IRS has created the 1040 and related short forms along with their supporting language and instructions, it is enough to give Albert Einstein fits.

Perhaps if the IRS wanted to eliminate errors – their excuse for getting into bed with H&R Block et al – they might want to look at the mess they created and translate it into simple English and simple basic math.



This column is the opinion of managing editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209-249-3519.

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