Wednesday, November 5, 2014


As most readers of TWTP have found, when it comes to 1040 preparation I am not a great supporter of CPAs, or of the AICPA.

No, my mother was not scared by a CPA when pregnant with me, nor was I scared by a CPA as a wee child.  Nor am I "jealous" of the CPA because I failed the test or for any other reason.  I have never had any desire to become a CPA - as I never had any desire to be able to audit financial statements.

As I say time and again, the mere existence of the initials CPA after one’s name does not in any way, shape, or form indicate whether or not that person knows his or her arse from a hole in the ground when it comes to 1040 preparation.

And the main purpose of the AICPA, like the AMA or any labor union, is to promote and protect the income and status of its members, regardless of the affect, either good or bad, their actions, or the results of their actions, may have on the public, potential clients, or other practitioners.

The recent AICPA lawsuit to end the IRS voluntary Annual Filing Season Program had absolutely nothing to do with stopping the IRS from overstepping its authority.  The judge in the case was no fool, and recognized and identified the true reason for the suit –

The crux of plaintiff’s concern is apparent:  its membership feels threatened by the specter of increased competition from previously uncredentialed tax return preparers who choose to complete the program.”  

The AICPA believes that CPA’s “own” the tax preparation business, and wants to stop any credential, designation, or program that identifies competence and currency in preparing 1040s – which, in reality, the CPA credential clearly does not do.

When it comes to accounting and financial and tax planning for publicly held, and more complex privately held, business entities and complex estates, trusts, and NPOs, CPAs are most certainly an excellent resource.  And, under state law, CPAs are a necessity if your business needs formal financial statements for third parties in varying degrees of “verification”.

But for basic accounting, financial planning, and “in-house” reporting a “non-certified” Public Accountant is often more than sufficient for the task at a lower cost.

And with the preparation of, and planning for, 1040s and the returns of “normal” closely held business entities, estates, trusts, and NPOs, most EAs and the majority of “unenrolled” preparers are certainly competent and current, and in most situations are a far superior choice than a CPA – especially in terms of value for fees paid.

To be fair, I do know of CPAs who are indeed highly competent and remain current in the preparation of 1040s, like my fellow bloggers Joe Kristan and Peter J Reilly as well as fellow members of the National Association of Tax Professionals.

Fee studies consistently show that CPAs charge more for preparing 1040s, and other tax form, than Enrolled Agents and “unenrolled” preparers, although Enrolled Agents and “unenrolled” preparers may be superior in competence, currency, and experience when it comes to 1040 preparation, and more often than not provide more personalized service.  In other words, when it comes to 1040s on average you get more “bang for your buck” with a non-CPA preparer.

An individual CPA may well be the perfect choice for your situation, whatever it may be – but it is most likely because of the specific education (initial and continuing), training, experience, temperament, and billing and other business practices of that unique individual, and not because that individual is a CPA.



Chris Johnson, EA said...

Great post and I wish the Enrolled Agent designation could be more widely known. It's pretty slam dunk to me - a CPA may or may not prepare taxes for a living. An Enrolled Agent definitely prepares taxes for a living. An un-enrolled tax preparer like yourself, by the very nature of the business you promote, definitely prepares taxes for a living. On top of that - a CPA must take continuing education to maintain their license, but it doesn't have to be related to taxation. An Enrolled Agent must take continuing education to maintain their license and it MUST be related to taxation. Any
un-enrolled return worth their fees will take continuing education related to taxation, as do you.

As far as the merits of the EA designation goes, all I can do is toot my own horn and hope the outside world hears it once in a while. BEEP BEEP!

Thanks for the post.

---Chris Johnson, EA

Robert D Flach said...

CJ, EA -

Glad you enjoyed it.

Thanks for the additional comments on CPAs.

Keep on tooting!