Friday, August 20, 2010


The IRS had previously announced that the registration fee for tax preparers under the new regulation regime would be $50.00, which would go to the IRS to cover the costs of the program, plus a “service fee”, which would be paid to the outside contractor who would administer the program.

Now they have identified the contractor – Accenture – and announced that the service fee would be $14.25. So the total cost of registration would be $64.25 per year.

Before going any further I must ask why the IRS needs an outside contractor to “administer” the program. I have concerns with an outside profit-making organization being involved with tax administration. I was very much against the IRS using outside collection agencies, which it apparently no longer does.

What is Accenture going to do that the IRS could not do internally – probably better and at less cost (as was the case with collections)?

That said – I would like to address continuing comments, some from legitimate, informed and competent sources, that the cost to the tax preparer of the new regime will cause the cost of tax preparation to materially increase.

My fellow tax blogger Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG, a proven competent and knowledgeable tax professional with sincere concerns about the new regulation, has said in his recent post “Shulman Power Grab To Be Paid for by $64.25 Charge Per Practitioner” that -

It will also increase the cost of getting a tax return prepared without a corresponding increase in the quality of the work.”

Let’s look at the new requirements from the point of view of my one-person tax practice.

I currently prepare about 400 “sets” of returns (a “set” could be anything from a New Jersey homestead rebate application for a senior tenant – a NJ TR-1040 - to a federal Form 1040 and several resident and non-resident state returns) each year. If I am required to pay $64.25 per year to maintain my status as a “Registered Tax Return Preparer” that works out to an additional 16 cents per set.

I will also be required to take a one-time initial competency test, and pay a one-time fee to do so. The cost of taking the test is currently unknown, as the details of the testing are not yet worked out. As I said this will be a one-time fee and I expect it would in my situation work out to less than $1.00 per “set” of returns.

The final requirement of the process is 15 hours of annual CPE credits in taxation. So far this year I have already earned over 25 hours, and I will add 8 hours with the annual NATP year-end tax update in November. I also have another 8 hours of state income tax CPE. I currently earn much more than the minimum 15 hours per year – I expect an average of 24 per year - so this requirement would not add one penny to my annual expenses.

And, as I have said all along, if a serious tax preparer is not already taking at least 15 hours of CPE in taxation per year then he/she certainly should be – regulation or not. Hey – that is just 2 days.

The only additional cost that the CPE requirement may create for me involves the mandatory 2 credits per year in ethics. However, as this may be automatically built in to normal CPE offerings, such as the annual update class, it may not result in additional costs – just less actual tax knowledge for the same money.

I have also said all along that if I am not already an “ethical” tax preparer having to sit through 2 hours of ethics training each year ain’t going to magically turn me honest. At most an ethics update of 1 hour every other or every third year would be much more appropriate.

So at the very most I may increase my fee per “set” of returns by $1.00 per year, which would more than cover the added costs to me of the new regime. Big whoop - hardly a "material" increase!

Bigger firms with a hundred of so tax preparers on payroll will have much more additional costs – but these firms have many, many more clients than I do to spread the costs amongst. So I see no real problem here.

I would like Joe, and others who feel the same way, to give me real specifics of how the new regulation regime will add substantial costs to a tax preparation practice.

Joe says that the increased cost will not come with a corresponding increased qualify of service. If a tax preparer must spend more money each year on CPE, which would result in an increased fee, then one would expect his/her tax knowledge to be enhanced, which would certainly benefit the client.

What Joe does get right in his post is his bottom line. Here we have always agreed.

The only way to really improve the quality of tax return preparation is to drastically simplify the Byzantine tax law. That's not in the proposed regulations.”

As an afterthought aside – it may seem contradictory that I accept an additional $64.25 fee to be regulated by the IRS but am vocally against paying New York State $100.00 per year to be able to continue to prepare NY resident and non-resident individual income tax returns.

The comparison is clearly apples and oranges.

The IRS regulation regime is a clear attempt to make sure individuals who prepare federal income tax returns (except for CPAs and attorneys) are minimally competent and keep up-to-date on federal tax law. This benefits tax administration, the individual taxpayer client, and the tax preparer. The registration and testing fees are used to administer the program.

The State of New York extortion of tax preparers has been instituted solely for the purpose of raising money for the State Treasury. It involves registration only. There is no concern that those who register are competent – no testing or CPE requirements or any other standards for registering preparers. And the State of New York oversteps its authority by imposing the fee on all tax preparers – even those who have absolutely no physical presence in the State of New York. A tax preparer whose office is located in Alaska, who never sets foot outside of the state of Alaska, must pay NY the $100.00 fee if he has clients who have moved to Alaska from NY during the year or who otherwise need to file non-resident NYS income tax returns.

The NYS annual registration fee benefits only the NYS Treasury. It does not provide any benefits whatsoever to New York taxpayers or to the tax preparers who are forced to pay the extortion.


Anonymous said...

The new IRS regulations won't have a huge impact on sole practioners, but I think there is going to be a big impact on store front franchises that rely on seasonal, part time preparers to staff their offices. I got my start at one; we were trained by in house staff, then hired to work 15 weeks at a small cut above minimum wage plus 5% of fees IF we did more than 50 returns for the season. Working only nights and weekends, the most I ever did was a little over 100 returns... So now, who pays for the IRS (and NYS) yearly fees? How much is it going to cost franchises to get their training certified for CPEs? Who's going to pay testing fees? And, if I have to register, test, and train, am I going to be willing to work for a cut above minimum plus a small commission? Probably not...

Robert D Flach said...


Trust me – anything that attempts to improves the competence of the tax preparers employed by and the quality of the “product” of “store front franchises” such as you describe (and we know who you mean) is certainly a good thing!

The creation of the tax preparer regulation regime was overseen by the former CEO of Henry and Richard, now an IRS Deputy Commissioner, so I am sure H+R and their ilk will find some way to benefit from it.


Anonymous said...

This is going to push me out of the business. I have been preparing tax returns like my father before me for years. My practice is very small, maybe 100 people. They have all come to depend on me over these many years. After I pay expenses there isn't that much left and if I have to put out 6 or 700.00 for 15 hours of CPE credits I will have to fold

Robert D Flach said...


You should be able to get 15 hours of qualify CPE for much less than $600-$700!

NATP's 2012 Year-End Update is $349.00 for members for 2 days (16 hr).

See -


Anonymous said...

Thanks Robert I will certainly look into it. I would really hate to have to leave the business.