Thursday, June 26, 2014
THE IRS JUST CAN'T SEEM TO GET IT RIGHT (CERTIFICATION OF UNENROLLED PREPARERS EDITION)
The recent issue of MAIN STREET PRACTITIONER, published by the “other” NSA (National Society of Accountants), of which I am a member, includes an article titled “IRS Considering Voluntary Certification for Unenrolled Preparers”.
The article discussed some of the broad outlines of the IRS proposal, “which are still preliminary and subject to change”.
It appears that participants would be required to pass a competency exam AND take a minimum of 15 hours in CPE every year. Passing the test would be an annual and not a one-time only requirement.
The annual 15 hours of CPE would consist of at least 3 hours of tax law updates, which the IRS identifies as a “refresher course”, and the ridiculous 2 hours of ethics preaching, with 10 hours available for any other tax law related topic.
Accredited CPE providers would develop and administer the “refresher course”, based on an outline of required topics provided by the IRS, AND the annual competency test, which would consist of a minimum of 50 questions.
Tax preparers who passed the RTRP test (when the mandatory licensure program was in effect), the Accreditation Council for Accountancy and Taxation (ACAT) exam, or a state-sponsored tax preparation exam (in a state that requires licensure of tax professionals like Oregon or California) will be exempt from the annual exam, as will EAs, CPAs, and attorneys.
Those who meet the requirements would be included in a public IRS database of “approved preparers”, which would include Enrolled Agents, CPAs, and attorneys (who presumably have been issued a PTIN), and receive an official IRS certificate to hang in their office.
Tax preparers who do not chose to participate in the voluntary certification program would no longer have the right to represent clients before the IRS for returns they have prepared.
The IRS would launch a public awareness campaign to tell the public to go to only “approved preparers”.
There are a lot of things wrong with this proposal.
First, and foremost, is the idea of “approved preparers”. Those who pass the test and become part of this voluntary certification program should NOT be referred to as “approved preparers”, the database should NOT be identified as being of “approved preparers, and the public awareness campaign should NOT instruct taxpayers to use only “approved preparers”. The IRS should not be able to “approve” preparers.
Those who meet the requirements of the program should be issued a designation similar to “Registered Tax Return Preparer” (RTRP). The database should be of Enrolled Agents and those designated under the new program ONLY. It should NOT include all CPAs and attorneys with a PTIN.
CPAs and attorneys should be permitted to apply for and be granted this new voluntary designation, and the additional initials that would accompany the credential. This would identify their competence and currency in 1040 tax law. Only CPAs and attorneys who received the new designation should be included in the public database.
Participants should NOT be required to pass a test each and every year. There should be one initial competency test. When all tax preparers were required to pass a competency test under the now dead mandatory RTRP licensure program the test needed to be relatively basic so as not to force too many preparers out of business. However, the new voluntary program should have a much more detailed and comprehensive initial one-time only competency test.
The article said that EAs, CPAs, and attorneys would be exempt from the annual test. EAs would not be volunteering for this new designation, because they already have a much better designation. As I said, CPAs and attorneys should be allowed to apply for the new designation, and should have to meet the same competency test and annual CPE in taxation requirements as any other participant.
I do applaud the exemption of those who passed the RTRP test, ACAT certification holders, and state licensed preparers from the testing requirement. One of my biggest problems with the original IRS required RTRP program was the fact that it did not provide a “grandfathering” exemption to the competency test. As this is a voluntary program, I would not insist on a grandfathering exemption.
While I would support having currently accredited CPE providers develop and administer the “refresher course”, and would support having the competency test administered by the different CPE providers (anything would be better than the system that was in place for the previous RTRP test). But the competency test should be a universal test written by the IRS. A person taking the test in Atlanta GA should have to take and pass the exact same test as a person in Boondock KS, San Diego CA, or New York City.
The IRS public awareness campaign should educate the taxpayer public that only Enrolled Agents and RTRPs (or whatever the new designation is named) have proven competence by passing a detailed test and remain up-to-date on the tax law via required annual CPE in taxation. It must not identify certain preparers as "approved" and imply that all others preparers are not competent or legally able to prepare returns. CPAs and attorneys, who have not been also credentialed under the new voluntary program, have NOT, merely by virtue of possessing the initials CPA or JD, proven to anyone that they are competent or current on 1040 preparation, and the IRS should not mislead the public by so implying.
And the IRS should NOT deny tax preparers the right to defend or explain, or assist their clients in defending or explaining, the tax returns they have personally prepared during the audit process. Those who do not volunteer to participate in the new credential should not be denied anything that they are currently able to do.
As an aside, and to be perfectly honest, a new voluntary tax preparation credential, even in its current proposed form, will have absolutely no effect on my own individual tax practice. I am not looking for new clients – and am actually looking to “thin the herd”. My current clients would continue to come to me regardless of whether or not I was “approved” by the IRS. I would have absolutely no need to participate in the program – although I expect many other currently “unenrolled” preparers will welcome the opportunity (as I probably would have ten years ago).
I have consistently stated that the IRS is not the best organization to administer a 1040 preparation credential. It should be maintained by an independent industry-based organization, like the ACAT. But it should not be tied to one particular membership organization (as the current ACAT is to the “other” NSA). It must be supported by, and it’s board must consist of representatives of, all the various legitimate tax preparation related membership organizations.