Friday, September 30, 2011


Lawyer Darrin T Mish has provided an update of the new PTIM procedures in “Tax Preparers To Be Fingerprinted By IRS” at his IRS PROBLEM SOLVER BLOG.

In discussing the fingerprinting process he says –

Attorneys, CPAs, enrolled agents, enrolled retirement plan agent and enrolled actuaries are not likely to be required to be fingerprinted. But they must declare whether they have been convicted in a felony the last 10 years. This is one of the standard questions in the PTIN application.”

Enough is enough!

It is bad enough that attorneys and CPAs are exempt from the initial proficiency test and required CPE in federal taxation, allegedly because they have already passed tests (with little if anything to do with 1040s) and are already required to take CPE (but not in federal taxation).  But if I have to waste my time and drag myself to some supposed central location and be fingerprinted in order to continue to make a living why not attorneys and CPAs who want to prepare 1040s?    

And conversely, if the IRS is willing to take the word of someone with initials already after their name that they have not been convicted of a felony in the past 10 years why is my word not just as good?  

Why this fingerprinting in the first place?  Registration is good, but this is going overboard.  Fingerprinting has nothing to do with verifying one’s ability to prepare 1040s. 

EA’s were not fingerprinted when they applied for the designation (according to an EA).  I do not believe CPAs or attorneys are fingerprinted before being awarded their initials (if I am wrong, please tell me).  I don’t know if engineers or architects or doctors are fingerprinted as part of their regulation regime, but I doubt it very much.  I do know that EROs (Electronic Return Originators) were fingerprinted, which is also ridiculous.

It is my understanding that the fingerprinting is solely for the purpose of doing the “background check”.  The fingerprint record will be destroyed once this has been processed, and not kept in a permanent data base.  This better be true!

The proficiency exams will begin soon, and I must pass it by 2013.  I am not rushing out to be among the first to be tested.  I will wait until they are sure that it works properly.

To be perfectly honest, I am secretly hoping that there will be so many problems with administering the test that the IRS will rethink its position and decide to do some kind of “grandfathering”.

Also exempt from the proficiency test are supervised employees of attorneys, CPAs, or EAs employed by a law firm, CPA firm, or other recognized firm, who prepare but do not sign, and are not required to sign, federal 1040s (and 1040As).  These are the “underlings” of CPA and legal firms who actually do all or most of the work but do not sign the return so the client thinks a CPA or lawyer prepared the return and will pay the excessive fee.  

These employees have not passed the CPA exam or the Bar exam (not that they are anh test of 1040 knowledge).  There is no proof, via the testing that is required of me, that they know their arse from a hole in the ground about federal income taxes.  So why are they exempt?

First of all there should be grandfathering. For example, as I suggested in my letter to the IRS on the subject back in the summer of 2009, “tax practitioners who have been preparing federal individual income tax returns consistently for five years (60 months), who have earned 50 hours of Continuing Professional Education credit in Individual Income Taxation in the two year (24 month) period prior to registration, and who are not currently prohibited from preparing federal income tax returns because of past bad acts will be exempt from taking the initial proficiency examination.”  This is merely my suggestion.  The look-back period and accumulated CPE could be different.

Second, ALL individuals who are required to have a PTIN – basically all individuals who want to prepare 1040s (and 1040As) for a fee – except Eas would be required to take the proficiency test, unless exempt under grandfathering, and maintain 15 hours of CPE in federal income tax annually.  This includes CPAs and attorneys and supervised employees.  Enrolled Agents would be exempt because they have already passed a more extensive test in federal taxation and have annual federal taxation CPE requirements in excess of the RTRP.  CPAs and attorneys who pass the test, or are grandfathered, and maintain the CPE will be endowed with the additional initials RTRP (i.e. John Doe, CPA, RTRP).  Only RTRPs and EAs will be allowed to prepare federal individual income tax returns for a fee.



Unknown said...

As I started to read your post today, at the mention of required finger printing and your question of why "us" and not "them" I was Immediately drawn to thoughts of The Third Reich and the need to identify those who weren't "pure".

Personally, I think those that need to be "mark" and identified, well, the IRS has it bass ackwards.

Margaret said...

"allegedly because they have already passed tests (with little if anything to do with 1040s) and are already required to take CPE (but not in federal taxation)"

I can understands your concerns to a point, and I would agree that EAs probably don't get the credit they deserve, but I wouldn't say your statement above is 100% accurate.

(1) One of the four sections, Regulation, does include Taxation, both business and individual. The majority of that test is tax, plus some business law and professional ethics.

(2) Although officially speaking a CPA can take CPE on any accounting topic, not necessarily relevant to the work they do, we are subject to professional ethic requirements, beyond just Circular 230. This includes not doing work that we're incompetent to do. I don't know how often a license is revoked for that, but it certainly allows for that to happen. But effectively, by ethic standards we are required to take tax CPE if we're doing tax prep.

(3) My understanding of the PTIN requirement is that you pretty much can't touch a tax return until you have one (if you don't fall in one of the exceptions). Logistically, that means every college graduate going into public accounting has to *immediately* get a PTIN and pass the test. Even if they eventually turn audit, every new staff will start out doing a mix of tax and audit. They need to be able to do tax prep if that's the work that's available. And although technically a partner might sign the return without careful review, again, ethically they're bound to not do that. New staff aren't just set free to do whatever they want, in a good CPA firm they are closely supervised when they first start, there is lots of training, good manager and partners strongly encourage asking questions if you're not sure about something.

As a side note, I was fingerprinted when I took the exam, but I think that was for identity purposes to make sure the same person took all four sections, they took your fingerprint each time to make sure it matched.

Trish said...

Robert, my response got too long so I posted it here.

Tom said...

Like I have said in the past and people laugh but the IRS is setting up an elite snitch tax/financial force and CPAs, EAs, those who continue under the banner of RTRPs will be the ones who are going to lead as they are already legally and lawfully "deputized" by the IRS to inform the IRS about questionable or aggressive tax items of their clients or face stiff punishment.

All these new rules and finger printing,registration, etc. are just to weed out the weak kneed ones...

Concerning the PTIN fees having now gone from good for 3 years to just one year that is because the IRS was amazed by the amount of money it collected for it golden pot - 700,000 X $65 = $45.5 million dollars...