Tuesday, June 19, 2012


I had originally planned to post a series of interviews with representatives of the four “initialed credentials” that are permitted to prepare income tax returns under the new IRS regulation regime – JD, CPA, EA, and RTRP - based on a discussion over at Bruce (THE MISSOURI TAXGUY) McFarland’s YouTube “McTax Hangout” a few weeks ago, on the differences between the included the differences between the designations and the exemption from proving competence and currency (i.e. taking the initial competency test and maintaining annual CPE in taxation) given to attorneys and CPAs, as well as other current tax topics. 

While not yet endowed with the RTRP initials, I planned to represent the previously unenrolled preparer.

As of this writing only the Enrolled Agent – Trish McIntire of the McIntire Tax Center in Arkansas City, Kansas – has responded to my interview questionnaire.  Trish writes the blog OUR TAXING TIMES.  She often writes very specifically about the tax preparation business.  She usually has something good and interesting to say, and I often find myself saying “Right on, sister!”. A fellow lover of the American Musical Theatre, Trish is very involved in her local theatre group.

There is constant confusion among the taxpayer public as to just what is an Enrolled Agent is.  An Enrolled Agent is not an agent, employee or representative of the Internal Revenue Service. An EA is an independent, private tax professional who is “enrolled” to act as a taxpayer’s “agent” in proceedings with the IRS.  An Enrolled Agent is “enrolled” to “practice before the IRS” by virtue of taking the Special Enrollment Examination and maintaining a required amount of CPE credits in the specific area of taxation (and, of course, 2 hours per year in ethics).  Both the competency exam and the continuing education requirements for EAs are more extensive than those for RTRPs.

(Q) Explain the difference between an RTRP, an EA, a CPA, and a tax attorney – and in what instances a taxpayer would need each with regards to a 1040.

(A) RTRP, EA. CPA and Attorneys are groups that can, with a valid PTIN, prepare tax returns for compensation. There isn’t a special IRS designation for “Tax Attorney.” The IRS gives the same rights of representation to all attorneys in good standing with their state boards. So my brother with his brand new law degree has the same privileges before the IRS as an experienced tax attorney. But I wouldn’t let him handle a tax case for me. Holders of the RTRP and EA designations are tested by the IRS while CPAs and attorneys are tested on the state level by their state licensing board. All have continuing education requirements which are set by the same group that tests them. All groups have the right to represent clients before the IRS but what the RTRP can do is limited by the IRS.

There is no real hierarchy in the designations for a taxpayer when it comes to tax preparation. The ability and interest to do a type of return depends on the preparer and their practice.  A RTRP might be a wiz at farms (not on the RTRP test) while a CPA doesn’t handle returns with EIC. In representation, the RTRP is restricted so any of the remaining tax pros might be a better choice. Again, other factors need to be considered in choosing a representative.

(Q) Currently CPAs, and attorneys are exempt from proving competence and currency in 1040 preparation under the IRS tax preparer regulation regime.  Regardless of your opinion on whether or not the regulation regime is a good idea – explain either why the exemption for CPAs and attorneys is appropriate (and how passing the CPA or bar exam qualifies one for preparing 1040s) or why CPAs and EAs should not be exempt.     

(A) The test for a RTRP designation is a minimum tax competency test. The same material is tested in the EA exam. The question is do any of the state tests for a CPA or attorney license cover all that material in the same depth? From what I’ve heard, it doesn’t. The other issue is that tax related continuing education is not required for attorneys and CPA. They can take tax courses but they are not required to take them. We end up with 2 standards and the groups that the public would assume to be better able to handle tax issues are the groups who have less testing and no continuing tax education requirements.

(Q) The talk of tax reform (even though only talk at this point) has turned to eliminating “tax expenditures”.  What current tax deductions and credits would you keep in a new simpler Tax Code, and what deductions and credits simply have to go?      

(A) I would get rid of all those deductions for personal expenses that most people can’t use or make them direct deductions. Employee business expenses, personal casualty and theft losses and mortgage interest come to mind. Get rid of Schedule R. Put in inflation adjustments in taxable Social Security. Something needs to be done with charitable deductions but I don’t know what.

(Q) Is the Tax Code the proper place for providing “social benefits”, such as tuition subsidy (the education tax benefits), supplemental welfare (the Earned Income Credit and refundable Child Tax Credit), and to encourage energy efficient purchases (the Energy Credit)?      

(A) My concern with a blanket removal of “social benefits” is the Earned Income Credit. If Congress wants to pass an incentive for energy, the Dept of Energy should administer it. HUD should take care of housing incentives, you get my point.  I understand the idea for doing it on taxes – it’s quicker, but that’s why we’ve had so much fraud lately. If Congress insists on using the IRS for processing, keep it separate from the 1040. Kansas has a property tax rebate that is handled by the KDOR but it has its own return and processing timetable. That way the claim can be double checked and not hold up the KS-40 refund.

That might be the answer for the Earned Income Credit. I have a real problem getting rid of this program. There is a lot of fraud but there are a lot of hard working people who need that money. It’s their cushion against medical bills and emergencies (car repairs to keep working). Yes there are a few who don’t take better work to keep their refund maxed out. But so many more would be happy to lose the EIC if their income would go up. Administering it through a Federal department might be an option as long as it stays reasonably accessible to everyone who qualifies.

(Q) Do you think you will see a true simple Tax Code in your lifetime, with truly minimal deductions, no credits, and either a flat tax or only 2 tax brackets?       

(A) No! We don’t have the people who can do that. Have you read the book “Showdown at Gucci Gulch”? It’s behind the scenes of the 1986 tax reform. We don’t have the people who are passionate about the changes or the leadership who are willing to make it work. On top of that, lobbyists are much more influential today than in 1986 and would make cutting their credit or deduction impossible.

(Q) I have suggested doing away with the tax deduction for depreciation of real property (see my post http://wanderingtaxpro.blogspot.com/2007/11/here-is-something-to-think-about.html). What do you think of this idea?       

(A) I would have a hard time explaining to a client that they can’t take any part of the new business building off their taxes.  They can depreciate the new tools but not the building. Also, the depreciation might be more necessary to the business early in the life of the building than the tax on recaptured depreciation later. And don’t forget, there is a good chance that there won’t be any recapture later because of death and the stepped up basis. I don’t see this one happening at all.

(Q) Now that the tax season is finally over, how will you be spending your summer vacation?      

(A) Still doing returns - an appointment coming in this afternoon. I’m also getting ready to direct a show and co-writing a director’s handbook for the theatre. I’m updating the theatre’s website for the new season and redoing my office site. And catching up on paperwork and filing.

Thanks, Trish!



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