Monday, August 3, 2009


This past Thursday, July 30th, the IRS held a Public Forum on Tax Return Preparer Review in Washington DC. On the panel were representatives of the National Association of Enrolled Agents, the National Association of Tax Professionals, the National Society of Accountants, the American Institute of Certified Public Accountants, and the American Bar Association.

The National Association of Tax Professionals was represented by Larry Gray, former NATP President and currently the Association’s Government Affairs Liason. NATP, with a membership of 19,000+, is unique in that is represents “all tax professionals whether CPAs, attorneys, EAs, accountants, financial planners, franchisees or other participants in the industry”.

According to Larry’s presentation, NATP surveyed its membership and found most of them agreed that regulating tax professionals would “make a contribution toward reducing the tax gap”. NATP supports an approach using the five “E”s – Examination, Experience, Education, Ethics, and Enforcement.

Speaking about an initial proficiency test Larry said –

We believe that an examination, whether it’s the CPA exam, the state bar, or the Special Enrollment Examination, is nothing more than a demonstration that someone has acquired minimum knowledge to enter the field. That someone passes one or more of these examinations says nothing about their competence in three, five, or ten or more years’ time. It states nothing about their morality or ethics either.”

NATP “recommends that a simple registration process be initiated first”. Existing practitioners who belong to a professional association could be granted a “waiver” period wherein they would not have to take a test. “If, after a designated period during which they obtained CPE, they experienced no ‘problems’ with returns they’ve prepared, testing may be permanently waived. Alternatively, preparers could be subject to testing at any point after which they have demonstrated incompetence.

NATP feels “testing needs to be flexible because many professionals specialize” and that “an over ambitious testing process, requiring knowledge in all facets of taxation would only be burdensome”. Larry pointed out that, “the recently redesigned Special Enrollment Examination {for Enrolled Agents – rdf} demonstrates that it’s possible to segment licensing into those who just want to do individual returns and those that want to do more”.

On the subject of continuing education NATP suggests “an annual CPE requirement of 24 hours”, which would be in line with the current Enrolled Agent guidelines.

So the bottom line – NATP supports registration and licensure, an initial “open-book” proficiency test with some kind of “grandfathering” or “waiver” for existing practitioners, segmentation of licensing for 1040 preparers and those with other “specializations”, and a minimum annual CPE requirement of 24 hours.

Click here to download Larry’s complete presentation.

The National Society of Accountants (NSA) was represented by President James H. Nolen. According to a Society press release Nolan told the forum -

A minimum competency exam at the front end along with tax preparer registration, required continuing education and significant penalties for non-registrants should be mandatory. This should be coupled with aggressive enforcement by the IRS.”

Regarding the initial proficiency test Nolen said, “If a barber or a beautician needs pass a competency examination, then a tax preparer should as well, given that a poor effort by the preparer can have substantially worse effects on the client than a bad haircut.”

NSA also believes “that an orderly, phased implementation of registration and/or testing over a two or three-year period is mandatory. A shorter time period is likely to unnecessarily disrupt the filing process.”

As for CPE - “We support a requirement for continuing education to ensure continuing competence with respect to basic tax knowledge, especially given our ever changing tax code.”

NSA supports the establishment of a federal "administrative entity" to oversee tax preparers and ensure that any fees paid by preparers are used for regulation and to educate consumers, and that “this is preferable to a state-by-state approach”.

Nolen also noted that it is very important for the IRS to launch a robust consumer education program. “Without such a program, we are concerned that those individuals who do not comply with current requirements will not comply with any new requirements, either. A key is to bring those individuals into the tax preparer system and the best way to do so is to ensure that they suffer significant financial harm if they willingly flout the law. If we fail to bring these preparers into the system, we will merely be trying to increase compliance by the compliant and this effort will have missed its mark.” And, “Taxpayers must also be educated, by a number of means, to understand that a paid preparer must sign a return.”

During his presentation Dolen explained that NSA had previously formed the Accreditation Council for Accountancy and Taxation (ACAT) to offer tax credentials. ACAT offers an “Accredited Tax Preparer” (ATP) credential “for practitioners to obtain thorough knowledge of the existing tax code and the preparation of individual, corporate and partnership tax returns”. I do believe that I have heard of this obscure credential, but I doubt if the public has. To be honest it carries very little, if any, current weight.

Dolen has recommended exempting only those with appropriate ACAT tax credentials, state licensed Public Accountants and state licensed tax practitioners (currently only 2 states license tax preparers) from the initial proficiency test.

So NSA also favors registration and licensure with an initial proficiency test, with limited “grandfathering” for ACAT credentials and state licensed accountants and tax practitioners, and required CPE credits.

The National Society of Accountants has prepared a Model Bill on Tax Regulation. It appears from reading some of the bill that NSA would include those practitioners covered under Circular 230 (CPAs, attorneys, EAs, etc) in the overall practitioner registration process. The Circular 230 practitioners would be exempt from the initial proficiency test, but not the required CPE in taxation.

Click here to read the press release, here to download President Dolen’s complete presentation, and here to download the Model Bill on Tax Regulation.
to be continued . . .

1 comment:

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