AICPA CONTINUES TO PROMOTE THE URBAN TAX MYTH

Fellow tax blogger Jason Dinesen, of DINESEN TAX TIMES, whose posts I reference often in the BUZZ, brought my attention to “AICPA Lays the Smackdown on Dear Abby” by Greg Kyte at GOING CONCERN.

The piece concerns a letter submitted to and published by “Dear Abby” as “Couple Deep in Tax Hole Need Helpin Climbing Out”.

Here is the text of the letter –

“DEAR ABBY: I have just learned that my sister's husband of 35 years (I'll call him George) hasn't filed their personal income taxes going back a number of years. This has caused a lot of stress and anxiety for my sister, who recently underwent breast cancer treatment. Apparently, he hasn't filed because of his inability to organize. (His family has denial issues.)

Their professional tax preparer has met with both of them and tried to work out a step-by-step program, but George consistently fails to meet the deadlines. I love my sister and want to be as supportive as possible, but I'm unsure what I can do. I have advised her to seek therapy. She has copies of business-related documents relating to the unfiled tax periods, but not enough information to file on her own.

On top of everything else, she has several relationship issues with her children that are causing her grief. What else can I do? -- HELPLESS BIG BROTHER”

And here is “Abby’s” response –

“DEAR BROTHER: Failure to file one's taxes is a federal crime that could land your brother-in-law and sister in the slammer. That's why you should urge your sister to do something she should have done years ago -- take over the family finances.

She and her husband may need more help than their CPA has been able to give them. A group that I have mentioned in my column before is the National Association of Enrolled Agents (NAEA). These are tax specialists -- some of whom are attorneys and CPAs -- who are specifically licensed by the Department of the Treasury. Tell your sister to contact an enrolled agent by visiting www.naea.org TODAY.”

My initial reaction -

(1)  The letter from Big Brother mentions a “professional tax preparer”, but I do not see any indication that this person is a CPA.  So Abby’s reference to “their CPA” in her response is odd. 

(2)  Abby is right to recommend an Enrolled Agent to any person who has tax troubles.  Enrolled Agents are indeed “tax specialists” who have proven competence and currency in 1040 taxation by passing a difficult test and maintaining annual required CPE (continuing professional education) in taxation.

(3)  The “professional tax preparer” – who may be a CPA, or an EA, or “unenrolled” – has done his/her job – trying to implement a detailed solution.  However no tax professional – EA, CPA or “unenrolled” - can force a client to act properly.

(4)  Abby’s advice to “take over the family finances” is a good one.  But the advice I would provide as a tax professional is that the wife should file separate tax returns for the unfiled years to at least cover her arse.  If the husband insists on being an idiot, and she cannot do anything about it, at least she has complied with the law and cannot be penalized.

The issue in the GOING CONCERN post concerns a letter sent to “Abby” in response to her advice to Helpless Big Brother from AICPA Tax Executive Committee Troy K Lewis –

“DEAR ABBY: As chairman of the American Institute of CPAs' Tax Executive Committee, may I offer some clarification to you and your readers about your answer in your July 13 column titled, "Couple Deep in Tax Hole Need Help in Climbing Out".

 

In fact, THREE groups of tax preparers have unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS -- certified public accountants, attorneys and enrolled agents.

None are more qualified than CPAs. CPAs are licensed by state regulators and must meet minimum education requirements to sit for their national licensing exam and then fulfill ongoing continuing education requirements, as well as abide by a code of professional ethics. Attorneys have a generally similar system.

Enrolled agents are often former IRS employees who are licensed by the IRS after passing an exam. Enrolled agents are competent and respected tax professionals, but the fact they are licensed by the IRS does not mean they are better qualified or superior in serving clients than are CPAs or attorneys.

IRS.gov has a page explaining the different types of tax return preparers and their qualifications, which may be helpful to your readers. -- TROY K. LEWIS, CPA”

Lewis is correct when he says “THREE groups of tax preparers have unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS -- certified public accountants, attorneys and enrolled agents.”  But that is not the issue here.

His statement “None are more qualified than CPAs” is an out and out lie.  There is absolutely nothing about possessing the initials CPA that in any way, shape, or form guarantees that the possessor knows his or her arse from a hole in the ground when it comes to 1040 preparation.    

It is true that “CPAs are licensed by state regulators and must meet minimum education requirements to sit for their national licensing exam and then fulfill ongoing continuing education requirements, as well as abide by a code of professional ethics.”  But their education requirements, national licensing exam, and ongoing continuing education requirements are in the area of accounting and auditing – and not taxation.  The education may include a basic course in federal taxation, and the national licensing exam may have a couple of questions on 1040 taxation.  But CPAs have absolutely no requirement to take even 1 CPE credit in taxation.

Of the three groups with “unlimited practice rights under Department of the Treasury regulations to represent their clients on any matters before the IRS” only Enrolled Agents have been tested and are required to take minimum annual CPE exclusively in federal taxation.

A specific CPA may indeed be a 1040 tax expert – and many are - but it is only because of the specific education, training, and experience of that individual and not because he/she has been granted the initials CPA.

The AICPA believes that they “own” tax return preparation, and publicly admit this, and continue to fight against more qualified tax professionals that threaten this assumed “ownership”.

And, to further respond to Mr Lewis’s misinformation, as Jason has correctly pointed out to me (highlight is mine) -

“The ‘former IRS employees’ thing is simply false. There are a few EAs who became EAs after working for the IRS, but it’s a small number.

I don’t know what the statistics are or how one would even find the statistics, but I feel confident in saying that the vast majority of EAs are NOT former IRS employees. In fact, of all the EAs I know, I can think of only 1 who became an EA after working for the IRS.

The rest of us are people who have passed the tests.”

 Unfortunately “Abby” gave in and replied –

“It was not my intention to imply that CPAs are less qualified than enrolled agents – and if I created that impression, I sincerely apologize.”

But “Abby”, and Mr Lewis, Enrolled Agents are indeed more qualified than CPAs when it comes to 1040 preparation and representation issues!

TTFN