Pippa Browde


Of the 150 million tax returns filed each year, approximately fifty-six percent are prepared with the help of a paid preparer. Although state-licensed lawyers and certified public accountants may prepare tax returns for clients, the vast majority of paid tax return preparers are completely unregulated. For low-income taxpayers who are eligible for refundable tax credits, these unregulated tax return preparers do more than just fill out tax returns. Return preparers who serve low-income taxpayers often also market consumer credit products, such as refund anticipation loans or checks.

Government agencies and consumer advocates have documented widespread problems with the tax return preparer industry. In 2011, the IRS promulgated regulations on tax return preparers by instituting minimum competency, background investigation, and continuing education requirements. But in Loving v. Internal Revenue Service, the Circuit Court of Appeals for the D.C. Circuit struck down the regulations on the grounds that they exceeded the scope of the enabling statute. The IRS indicated it would pursue a legislative fix. In the wake of the government’s defeat in Loving, policy makers, scholars, and practitioners are weighing in on the question of how tax return preparers should be regulated. This Article addresses a more fundamental question: Why should tax return preparers be regulated?

The calls for regulations and much of the existing literature on regulating tax return preparers explicitly stated or implicitly assumed that regulation would improve tax compliance. This Article contends that, while any improvement of compliance rates would be a benefit of regulation, the rationale for regulating tax return preparers who prepare tax returns for the working poor and sell consumer credit products should be to protect taxpayers as consumers. In support of this proposal, this Article first describes the myriad of services provided and products sold by tax return preparers to low-income taxpayers. Second, relying on empirical evidence on the relationship between tax return preparers and compliance, this Article challenges the rationale that regulation will improve compliance. Third, and finally, this Article re-frames regulation as a mode of consumer protection, supported by the relationship among low-income taxpayers, the government, and tax return preparers and as a check upon the market incentives that allow for exploitation of low-income taxpayers.

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