Monday, October 5, 2009


On September 30, 2009, the IRS held the final Public Forum on the subject of regulating tax preparers. The forum featured representatives of the Tax Preparation Software industry and “independent preparers”. Click here for the IRS webpage on this Forum.

Here is who spoke -

Software Industry Panel:
* Council for Electronic Revenue Communication Advancement (CERCA) – Michael F. Cavanagh, Executive Director
* CCH Small Firm Services – Leonard Holt, Vice President, Business Development
* Drake Software – John Sapp, Vice President, Sales & Marketing
* Intuit, Inc. – Dan Maurer, Senior Vice President and General Manager, Consumer Group

Independent Preparer Panel:
* H&R Block – Amy McAnarney, Executive Director, The Tax Institute
* H&R Block – Tony Zabaneh, Franchisee
* Jackson Hewitt – Marianne Moe, Franchisee
* Empire Accounting & Tax Service – Cynthia MacIntosh
* Independent Unenrolled Preparer – Raymond W. Heinen

As you can see there were really only two true “independent preparers”.

Everyone on the Independent Preparer Panel supports regulation of tax preparers (I must admit that I did not read the Software Industry Panel testimony due to time constraints).

Amy McAnarney, Executive Director of H+R Block’s Tax Institute, who said she was speaking “on behalf of H&R Block and Jackson Hewitt”, stated –

H&R Block and Jackson Hewitt have a strong history of supporting regulatory and legislative efforts to improve the training, professionalism and ethics of all tax preparers. We believe a regulatory program that focuses on increasing tax preparer compliance and performance standards is in the best interests of our two companies, the industry, and most important, taxpayers. Taxpayers deserve a tax system that they can trust and that works efficiently.”

(I am sorry – I just can’t resist. It is too bad that Henry and Richard and JH’s interest in “professionalism and ethics of all tax preparers” does not “trickle down” to these firms’ actual tax preparers).

The Block and Hewitt franchisees supported their company’s position.

Raymond Heinen, an Associate with Thoma and Associates, Ltd, says –

I would like to go on record as supporting a mechanism for either licensing or credentialing tax preparation professionals”.

Mr Heinen’s testimony included some excellent statements that needed to be made –

Please allow me to dispel, or at least question, some assumptions which may have crept into the dialog regarding the unenrolled preparer community:

1. Because they are unenrolled they are either unprepared or uninformed;
2. Because they are unenrolled they are incompetent or fraudulent;
3. Because they are unenrolled thay are unscrupulous or corrupt;
4. There is little or no difference between human error and criminal behavior;
5. Enrollment will solve all the problems of tax administration; and
6. Because a person holds a degree, license, or credential, they are de facto qualified to perform in that discipline.

I do not believe licensure or credentialing will ferret out all of the unprofessional practitioners or behavior – only scrutiny of the returns processed and prosecution of offenders will root out misbehavior

Well said, Raymond!

Cynthia MacIntosh of Empire Accounting and Tax Service told the Forum –

While reading the transcript of the forum held on July 30th, I am saddened and dismayed to see how others in my profession are conducting business. To that end, I must conclude that some level of registration is needed in order to curb these abuses. I invite some form of accountability since I work very hard to provide expertise to my clients.”

Cynthia sees “four recurring topics of concern: registration, education of both the tax professional and taxpayer community, testing, and enforcement”.

Ms MacIntosh echoes my feelings in her statement (highlight is gleefully mine) –

There is no reason why ANYONE should be treated differently based on their credentials. There are many CPAs and attorneys who have absolutely no business preparing tax returns. This way, at least, we’d know that registered preparers have taken steps to remain “prepared” each year.”

Henry and Richard franchisee Tony Zabaneh, feels that – “A national registration program should be applicable to ‘all’ tax preparers (paid or unpaid preparers associated with volunteer organizations like VITA, AARP)”, but is “comfortable with CPAs, Enrolled Agents and Attorneys being exempt from the initial exam”. He does, however, “believe that a continuing education requirement of year-over-year tax law and administration changes is a must”.

(Again I apologize – but I could not help laughing out loud at Mr Zabaneh’s statement, “Preparing an accurate return and gaining the trust of clients have been the hallmark of H&R Block since Henry and Richard Bloch founded out company fifty years ago”.)

Marianne Moe, a Jackson Hewitt franchisee, believes –

The IRS must first require all preparers to register with the federal government. This will provide valuable information regarding the size and scope of the tax preparer community that will help guide implementation of the education phase of the federal standard. Education and ethics requirements should be put in place as soon as possible following implementation of registration requirements. These requirements should apply to all preparers, regardless of their professional status or length of service. Experience does not equal competency, and every preparer can benefit from periodic education and testing on elements of the tax law.”

Ms McAnarney’s testimony proposed certain elements that should be part of the regulatory program. Read carefully the highlighted final recommendation –

1) The program should apply to all individual income tax preparers who either sign the return or who materially assist with preparation of a tax return but do not sign as a preparer, including:

• Paid preparers and preparers via organized volunteer organizations such as VITA and AARP.
• Circular 230 and non-Circular 230
• And, to some extent, software developers

2) We also believe the program should focus on federal individual income tax returns, specifically the 1040 series and its related forms and schedules.

3) The program must include a combination of examination and continuing education to demonstrate a minimum level of competence.

Specifically, an initial exam should be required to demonstrate a minimum level of competence in the areas of income tax knowledge, tax administration procedures and ethics. Circular 230 practitioners
{CPAs, EAs and Attorneys – rdf} would pre-qualify based upon their existing testing and ethics programs. As a result, we believe they should not be subject to this initial exam.

Continuing education should also be required to demonstrate an ongoing level of competence. We prefer a requirement focusing on year-over-year tax and administrative changes.

Last, in the area of examination and continuing education, we recommend that other certification programs be submitted for approval

H+R’s Tony Zabaneh comes right to the point –

I strongly recommend that programs like H&R Block’s and similar Certification and Education programs by other qualified organizations be ‘blessed’ by the IRS with any needed refinements as meeting the Education and Testing Standard Requirements.”

Now I see the method in Henry and Richard and Jackson Hewitt’s madness. They want tax preparer regulation with an initial test and continuing education requirements, but they want the IRS to permit the already existing H+R, and I expect JH, initial competency test and continuing education program to be accepted instead of an IRS created and administered test - so that H+R and JH employees would have to do absolutely nothing different than they are currently doing to become and remain licensed.

Gee, we all know how well the current H+R Block Certification and Education regime has done in combating incompetence and unethical behavior among tax preparers. Were not the majority of the tax preparers who were found to be lacking in both competence and ethics in the various government and non-government “sting” operations employees of H+R and JH?

H+R also wants their “certification” program to be “blessed” by the IRS and accepted in lieu of an IRS created and administered test so they can make more money by having tax preparers who are now required to take a competency exam pay them to administer the test.

The Public Forums on the question of tax preparer regulation are now ended, and the IRS must begin to sort through all the input it has been received and formulate its recommendations.

It seems that, with the exception of the American Institute of CPAs (for, in my opinion, self-serving reasons), all those who have testified, and I expect most of those who sent comments to the IRS, support some kind of regulation that would include registration, initial proof of competence, and ongoing continuing tax education.

And it looks like a majority of those expressing an opinion want all tax preparers, including CPAs and Attorneys and even volunteers, to be covered under this new regime with required continuing education in income tax topics. While I expect all would exempt Enrolled Agents from any initial testing, and some would also exempt CPAs and Attorneys, it appears to be a consensus that all preparers, regardless of credentials, should be required to complete minimum continuing education in the specific area of federal income tax.

I look forward to reading the IRS recommendations.



John C. Sheeley, EA said...

Here's an interesting thought:

The simplest answer to any exam requirement would be to require practitioners to take the "individuals" section of the enrolled agent exam. The exam is already available nationwide, on demand, at Prometric centers.

No need to reinvent the wheel or make it overly complicated.

Robert D Flach said...


I was not aware how the EA exam works - but if there is already a section on 1040s I agree. There is no reason to create a new test.

I still want to be "grandfathered".


Stacie Clifford Kitts said...

Nice summary -

I guess the one thing that bothers me about this whole process is the assumption that testing is going to weed out bad preparers. Based on what I have read for my "Stupid Preparers" series, I have come to believe that many of these "stupid" preparers are choosing to be bad, not out of ignorance, but out of greed. Testing is not going to weed these people out. As you mention, the H&R and JH firms had problems - these franchises - in my opinion - were promoting these illegal practices purely as a way to drive more traffic to their offices. It was a business strategy. Really, the only way to weed these people out is to monitor the preparers by actually looking at their work.

PS the CPA exam has a tax section although not by return type. Here in Cali the tests are taken via computer at "testing centers." The test is given year round. These centers already facilitate a quick testing process. I think the infrastructure for giving a test is already in place - maybe only a slight tweak or two will be needed.