Tuesday, November 3, 2009


I recently viewed an advance online copy of the Fall 2009 issue of the National Association of Tax Professionals’ “TAXPRO Journal”, to which I am a frequent contributor. It includes an interesting compilation of comments on the regulation of tax return preparers titled “Sound Off”, taken from those submitted to the IRS from July 24-31 in response to the Service’s request in IRS Notice 2009-60.

The comments in the compilation came from just about all “categories” of tax preparers, EAs, CPAs, “unenrolled” preparers, and volunteer preparers (none from attorneys), as well as one from a “Senior Tax Compliance Officer”.

It is interesting to note that each “category” of tax preparer who supported a federal regulation regime for tax preparers generally had somewhat or completely selfish reasons for supporting certain requirements or exemptions from requirements within the regime. This is just human nature.

For the most part CPAs are all for licensing, testing and regulating “unenrolled” preparers, but feel they should be exempt from the regime because they have already passed a competency test and are required to take annual CPE. However the test they took was not a competency test in 1040 preparation but in accounting and auditing, with perhaps a few 1040 questions (I am not familiar with the exact make-up of the CPA exam), and CPE requirements do not specify any classes in taxation.

For the most part EAs are all for licensing, testing and regulating ALL tax return preparers (CPAs and attorneys included) and would require an initial competency test for everyone, without any “grandfathering”, and federal background checks. This is because they were required to take an initial competency test and undergo a federal background check to become “enrolled”.

For the most part “unenrolled” preparers who have been in the business for many, many years, as many as 48 in the case of one respondent, are all for licensing, testing and regulating ALL tax preparers (CPAs and attorneys included), regardless of previous designation, but feel it necessary and important to “grandfather” preparers like themselves.

As a member of the third category, an “unenrolled” preparer with 38 unblemished tax seasons under my belt, I do admit that my call for a “grandfathering” exemption from any initial competency exam is somewhat selfish. I do not want to go through the inconvenience of a competency test at this point in my career to prove that I know what I have been doing for almost 4 decades. I feel that a consistent history of substantiated CPE credits is sufficient to document my education and competence. My argument for “grandfathering”, however, also considers the real world practicality of having the IRS test over 1 Million tax preparers (CPAs and attorneys included) within a relatively short period of time.

I must also note that volunteer preparers who work with the VITA program, again for the most part, ask for an annual testing process to assure currency, because VITA volunteers are themselves apparently testing each year.

While there are those, I am sure, in each of the categories who are totally against a federal regulation regime, for a variety of selfish and sincere reasons, what just about everyone in all categories can agree on is that some form of registration and licensure should be required, at least for currently “unenrolled” preparers, with initial competency testing for “some” members of the preparation community, minimum required annual CPE in taxation, and an official designation such as Licensed Tax Preparer or Licensed Tax Practitioner or Licensed Tax Professional.

From what I have recently read about IRS thinking on the subject, it appears that the IRS will suggest a regulatory regime beyond simple central registration that would include testing and required CPE components and that, I am pleased to say, would apply to ALL tax preparers, including CPAs and attorneys.

It is my firm belief that if a regulatory regime is to be instituted it MUST include ALL individuals who prepare tax returns for a fee, including CPAs and attorneys (EAs are already subject to a strict testing and CPE regime and would not be required to do anything more than be included in the registry, and perhaps having their designation changed to “Enrolled Tax Practitioner” or “Enrolled Tax Professional”). The same requirements for testing and CPE in taxation must apply to ALL who prepare 1040s.

What follows are excerpts from some of the comments from preparers like myself –

* “I am in favor of registering all tax preparers. And tax update classes should be mandatory. I have done taxes for almost 25 years. I am not in favor of testing someone like me. . . Every year I have gone to a minimum of 5 days of tax classes, which I enjoy. The classes, along with the tax publications I subscribe to, keep me current. If you insist on testing, is there any way to grandfather those of us who have prepared returns meticulously, have followed the tax laws to the best of our ability, and have had none or very little audit interaction or other problems with the IRS?

* “I have been preparing income tax returns since 1981. . . Just because a preparer is licensed or knowledgeable enough to pass a test, does not mean they are ethical. I feel those of us who have been preparing returns for many years should fall under a grandfather rule. . . I take pride in my work, in my business, and in the reputation I have established in my community. That is what is missing today, and no amount of testing or licensing will take the place of that.”

* “I do not have a CPA degree but I feel that I do a better job for my clients then some CPAs do. Just because these people have a degree does not automatically mean that they keep up with the changes in the tax law. I have seen a lot of returns done today by both CPAs and lawyers that were horrible. . . I have had my own business for 31 tax seasons.”

* “Over the years, I have found that many preparers purchase the latest Turbo Tax software, but have no idea about the latest regulations. They miss deductions and have no idea what to take for auto depreciation.” {note – in practice since 1975}

* “I prepared my first tax return in 1960. I have been a professional tax preparer for forty-eight years. . .I have unfortunately seen less than professional work from some of my colleagues who are CPAs, enrolled agents, etc. I don’t want to dwell on this but it is a fact.”

* “No test will ensure competence. I know any number of CPAs and attorneys who know nothing about taxes. I know any number of unenrolled, unlicensed, uncertified accountants who do. So testing is not really the solution. . .But too many individuals who shouldn’t be doing tax work have already passed a test. Another test won’t change that, but will give the public the false assurance that a level of competence has been achieved when it has not. That leads to even more trouble.”

As the introduction to the compilation suggests – “To review more comments, visit www.irs.gov and type Notice 2009-60 in the search field”.



Pete said...

As a CPA, I can attest that the four part CPA exam had precious few tax questions. Two years prior to sitting for the CPA Exam, I sat for, and passed, the EA exam. Two days of vigorous questioning on all aspects of tax law. I doubt any CPA could pass it with the knowledge they have on hand. And you and I know full well no attorney could.

Still, I look at registration with a skeptical eye. I believe the free market should reign: taxpayers should seek out competent tax preparers and compensate them accordingly. You're a prime example of someone who has had much success, thank you very much, without certification. Why the IRS thinks they can improve on that, I don't know.

Great article, by the way.

Robert D Flach said...


Glad you enjoyed the post.

Thanks for the insight on the CPA exam. It is as I thought.

You are right that I am "someone who has had much success, thank you very much, without certification". But I do support regulation because "it couldn't hurt".