Friday, July 3, 2009

NEVER SAY "FINAL WORD"!

I thought I had posted my "final word" on the subject of regulating "unenrolled" tax preparers.
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But then Dan Meyer of TICK MARKS discussed Nina Olsen's report to Congress in his post "Olson: Don't Look for Mercy Here, Scofflaw Tax Preparers".
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Dan's post has brought up an interesting idea. In describing Nina's call for regulating the unenrolled he says "in effect something comparable to enrolled agent status before being permitted to prepare tax returns commercially".
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Later in the post Dan says, "Congress needs to make it clear whether only EAs, CPAs and attorneys should be permitted to be commercial tax preparers before the proposed IRS regulations are put into place".
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The idea that Dan raises, intentionally or not, is - when it comes to registering and licensing tax practitioners should all those who want to prepare tax returns professionally be required to become "Enrolled Agents"? Rather then create a whole new designation and related bureaucracy just state that only Enrolled Agents will be able to prepare individual income tax returns for a fee.
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While I do not necessarily embrace the idea I do feel it is something worth thinking about.
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As with any form of licensure there would certainly need to be "grandfathering" - as I have said for practicality sake if nothing else.
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Existing EAs are already EAs, so nothing to do there. Existing CPAs would also be "grandfathered" and possibly exempt from taking the EA exam, but would be subject to the ongoing CPE in taxation requirements to be able to continue to prepare 1040s. Unenrolled preparers would be grandfathered in the same manner that I discussed for basic licensing in previous posts and, of course, be subject to EA CPE requirements for renewal. I don't quite know how to handle attorneys (in many aspects - not just tax preparation).
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I must admit that I am not familiar with the content of the EA exam. I do not know if it is limited to 1040 knowledge or if it also covers 1120, 1065 and 1041 issues. So far all discussion of registration and licensing has at least implied application to individual income tax returns only (1040s and 1040As). Would there need to be two categories of licensed, or "enrolled" tax practitioner - individual taxes and "entity" taxes (corporations, partnerships, estates and trusts)?
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I also do not know what additional invasive conditions apply to becoming an EA. EROs are required to be fingerprinted. Are EAs required to be 100% current with all their personal 1040 filings? I would be against such conditions for general licensure. Like the shoemaker with a hole in his shoe, it is possible for a competent and ethical practitioner to fall behind in personal tax filings and payments, considering the demands of the tax filing season. I personally automatically extend my own 1040 each year. This has nothing whatsoever to do with a preparer's knowledge of tax law. Now proven willful non-filing or understatements are another thing.
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Hey, if federal appointees can have tax FUs in their past why not a lowly preparer.
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One thing I do know if the way to register and license "unenrolled" preparers is to make all tax practitioners become Enrolled Agents - the name "Enrolled Agent" must be changed! Many members of the great unwashed masses, who already erroneously believe that all CPAs are automatically tax experts, have the misconception that an Enrolled Agent is some kind of agent of the IRS.
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I suppose if we chose the term "Certified Tax Practitioner" the AICPA would be up in arms. "Enrolled Tax Practitioner"? I have always liked "Licensed Tax Practitioner".
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TTFN

9 comments:

Monica Lawver said...

I do like the idea of utilizing the existing system, rather than creating a whole new one. And I like the term "Licensed Tax Practitioner."

Do you know who the IRS is consulting on this issue? Is it working with the AICPA, EAs, unenrolled experts, etc.? If so, I would hope you would join their discussion to provide your insight!

Robert D Flach said...

ML-

Commish Doug Shulman has said, “We (i.e. IRS) need to hear from the broadest range of ‘stakeholders.’” and that the IRS plans to hold open meetings with “constituent” groups.

I have written to Doug with my opinions on the issue, similar to what I discussed in my "License and Registraton" post. No reply yet.

Also no word yet on the public meetings and meetings with organizations like NATP.

TWTP

TomK said...

IMHO I still see this as a plan by the IRS to eventually elimate untold thousands of paid tax preparers (EA's, Unenrolled, CPA's, etc.) from earning a somewhat half-way decent income for themselves and their families, while at the same time the IRS will be setting up a completely controlled elite core of outside contracted preparers to do returns under strict government regulations and licensing.

Eventually in the future a private citizen will not be able to do their own taxes and will have to go to one of IRS's select practitioners or let the IRS do it, that is where I'm seeing this all headed...

Robert D Flach said...

TK-

Thanks for sharing your HO.

I totally disagree. If done properly registration of unenrolled preparers will not put thousands of tax preparers out of business. Certainly not EAs or CPAs. It will be a way for the hundreds of thousands of competent and qualified tax preparers without initials to get some "respect" and equal standing with those currently with initials.

There is no conspiracy within the IRS to create a "controlled elite core".

The IRS already regulates EAs - and these individual preparers are certainly not a "controlled elite".

TWTP

TomK said...

Just another thought - if it ends up that all private tax preparers will have to get licenses and go through yearly schooling and updates - do you not think then the same should apply for all IRS agents - from the ones who answer tax questions over the phone to the head of the IRS himself?

Robert D Flach said...

TK-

An excellent point!

I am not familiar with IRS training procedures - but would certainly want IRS agents to be current on tax law.

TWTP

Trish said...

Robert, currently the EA exam is a comprehensive 3 part test that covers all areas of federal tax and IRS representation (that includes corporations and estates.) All three parts have to been passed within a specific time frame and then the applicant undergoes a background check. As an EA, I would have a real problem with "grandfathering" in anyone based on years in practice to EA status. The last I heard specifics on licensing exam, it was expected that it would be along the lines of the final of the old HRB basic class. Fundamental tax knowledge with an emphasis on dependent and tax credit knowledge. I am assuming that the actually test is something NATP and NAEA are lobbing on. Using the EA exam, would limit the numbers who could qualify to prepare returns and, in my opinion, would increase the number of non-signing preparers and increase the problems licensing is suppose to solve.
Trish

Robert D Flach said...

Trish-

Thanks for the info on the EA exam. Based on this I agree that having all tax preparers become EAs, with necessary grandfathering, is not the way to go. It appears that there does need to be a separate category for "licensed 1040 preparer" or "licensed tax preparer" (including 1065, 1120 and 1041).

I have not finalized my opinion as to whether there should be separate "individual" and "entity" categories.

I do believe that the EA process could be used as a guideline for this new licensing - especially the fee schedule and CPE requirements.

Again - thanks for your always helpful input.

TWTP

Bruce said...

Sorry to be late here,

The term "Licensed Tax Practitioner" is indeed a good one, so the designation would be "LTP". Interesting.

Trish has valuable insight into this and I for one am interested where it comes from.

The idea behind a test similar to HeRBerts six week training is a frightening one. It is my opinion that un-enrolled preparers such as Robert or myself are not the reason behind the push for regulation. It is the Fast Food Chain prepares with only six weeks of training that has created this problem.

The rest of us are just being caught in it all.