WHAT YOU HAVE BEEN WAITING FOR!

I am sure there are several out there who knew it was inevitable that I would post my comments on the item “343,020 Reasons CPAs Should Talk Up Their Tax Expertise Now” by Jina Etienne, CPA, Director of Taxation of the American Institute of CPAs, at AICPA Insights - and have been waiting with baited breath.

Well – here it is!

Jina explains in the piece - “While CPAs have dominated the regulated tax preparation arena, that landscape is about to change.”  Thank the Lord that it is! 

And Jina tells us –

“Unfortunately, the public doesn’t really understand the difference between a CPA and other tax return preparers.” 

I wholeheartedly agree with this statement, but not in the way Jina intended.  The public, and most journalists, have for years believed the totally untrue “urban tax myth” that a CPA was automatically a 1040 tax expert. 

Articles and columns on 1040 topics constantly suggest that readers “consult your CPA” when they mean “consult your tax professional”.  The two terms are not interchangeable! 

How many times do I have to say this?  Just because a person has the initials CPA after his/her name does not mean that he/she knows his/her arse from a hole in the ground when it comes to 1040 preparation.

The CPA exam is not a test of 1040 knowledge or competence.  I doubt there are any questions on the exam that have to do with 1040 preparation.  I expect any tax questions on a CPA exam are concerned with “entity” taxation (corporations, partnerships, estates and trusts).  The CPA exam is certainly no substitute for the initial competency exam now required of “previously unenrolled” tax preparers.

And while CPAs are required to maintain a designated number of hours of annual continuing professional education, there is no requirement that any of this CPE be in federal 1040 taxation.

However, CPAs should be afraid, very afraid, of the new Registered Tax Return Preparer (RTRP) designation.

It is not that there are all of a sudden tens of thousands of new tax preparers to “compete” with the CPA.  There have always been hundreds of thousands of educated, experienced, and highly competent “unenrolled” preparers(like me) out there (often having to fix mistakes made on 1040s by CPAs).  Actually the new regulation regime has, and will, actually reduce the number of non-EA and non-CPA preparers.

What the new designation will do is affirm the fact that those who earn it have proven themselves competent in 1040 preparation, and remain current by taking annual CPE in federal taxation each year.  It will indicate to the public that these individuals, and not CPAs, are proven, if not tax experts, at least competent tax professionals.

CPAs are currently exempt from having to prove basic tax competence by taking the IRS exam and are exempt from having to remain current in tax knowledge by taking at least 15 hours per year of CPE in federal taxation.  Yet the IRS says it is ok for CPAs to prepare tax returns - while the rest of us must go through the hoops.  There is no good reason for exempting CPAs who want to prepare 1040s for a fee from these requirements.

Many EAs, who are also exempt, and for good reason, from the RTRP test, are actually sitting for it so that they can add the initials RTRP to their name.  This is because of the widespread public confusion about what an EA is.  If a CPA wants to be held out as a tax expert he/she should sit for the exam, maintain 15 hours per year in federal taxation CPE, and get the RTRP credential.

Jina wants clients to know that “their CPA is the premier provider of tax services”.  While “their” CPA may indeed be a tax expert – it has nothing whatsoever to do with the presence of the initials CPA.   It is only because of the education, training, experience, ability, temperament, and other factors that are specific to that individual preparer.

The RTRP, and the EA, are the premier providers of tax services – not the CPA!

TTFN