Monday, November 2, 2009


Licensing tax professionals will not close the Tax Gap. It will not even make a dent.

Licensing tax professionals will not do away with incompetent and unethical tax preparers. Regulation of CPAs, attorneys, doctors, architects, contractors, etc, etc has not done away with incompetent and unethical practitioners of these professions.

The IRS has a legitimate need for a central registry of all those who prepare tax returns for a fee. I believe that this is all the IRS really wants. I do not believe that the IRS started with the intention of getting involved with testing and monitoring CPE for the 1 Million + paid tax preparers. However registration and licensure will probably eventually become law.

For me the main reason to create a Licensed Tax Practitioner credential is for public education and protection.

Currently any cafone can hang out a shingle as a tax preparer. The general public has no way of knowing who is competent and current when it comes to 1040 tax law. The initials CPA have absolutely positively nothing to do with preparing 1040s, so that does not provide any indication of one’s ability as a preparer. Passing the bar and becoming a lawyer, in itself, has absolutely positively nothing to do with preparing 1040s, so that, also, does not provide any indication of one’s ability as a preparer.

It was Albert Einstein who said, “The hardest thing in the world to understand is the income tax”. So being considered intelligent and competent in one discipline does not mean that one knows his arse from a hole in the ground when it comes to the mucking fess that “the income tax” has become.

Having the initials EA after one’s name does indicate that a person is most likely competent and current in 1040 preparation – but the title “Enrolled Agent” is confusing to the average taxpayer. It implies, although incorrectly, that the person is an employee, representative or agent of the Internal Revenue Service. Most taxpayers have no clue as to exactly what the initials EA actually mean.

The general public does currently hold a totally erroneous misconception that a CPA is a 1040 expert. The AICPA knows this full well and exploits it. The Institute feels, and has said so, that it “owns” the tax preparation niche.

This misconception is, however unwittingly, perpetrated by uninformed journalists who will say, “See your CPA”, or “Consult a CPA”, or “Check with a CPA” when writing or talking about 1040 issues - instead of more properly saying, “See your tax professional”, or “Consult with a competent tax professional”, or “Check with a tax professional”.

If registration and licensure of tax preparers is properly done, and ALL those who prepare 1040s for a fee – CPAs and attorneys as well as currently “unenrolled” professionals - must register and meet the same requirements to become a Licensed Tax Practitioner in order to be able to continue to prepare 1040s for a fee (all EAs should automatically be designated as an LTP without further qualifying requirements – but perhaps be designated as an “Enrolled Tax Practitioner”) then the public would know for sure exactly who are truly likely to be competent and current in 1040 filing.
And if the process is properly done it should not create a financial hardship on tax preparers, and therefore should not significantly increase the cost of tax preparation. And it should also not place a significant additional burden on the federal budget. It should actually pretty much pay for itself.

Licensure of tax preparers has absolutely nothing to do with granting currently unenrolled preparers the ability to be called “tax professionals”. Most unenrolled tax preparers are already true tax professionals, and have been so for many years. A license will only make them “licensed”, and properly put them on equal footing with those CPAs and attorneys who also happen to be tax professionals in the eyes of the public.


1 comment:

Stefani Whylie said...

I agree completely. Being an EA, I've not only had to file amended returns for things that other enrolled agents have missed or incorrectly claimed, but I've also done the same for things that were missed by CPAs. Therefore, being licensed doesn't mean that we'll completely get rid of the incompetent tax preparers, but I think the ones that are unlicensed and are just in the field of taxation simply to make a quick buck come tax season may willingly choose to leave the field because of fear of increased regulation, and depending on how a license is obtained, those that are left will be forced to increase their basic knowledge. For now, I guess we can only wait to see what happens.