Monday, November 2, 2015


Russ explains –

The American Institute for Certified Public Accountants (AICPA) filed a lawsuit in July 2014 challenging the IRS’s Annual Filing Season Program (AFSP). Almost exactly one year ago, a District Court for the District of Columbia ruled that the AICPA did not have standing to sue. The AICPA appealed that ruling, and in a decision announced today the Court of Appeals for the District of Columbia ruled that the lower court was wrong: The AICPA did have standing and the lawsuit will move forward.”

Russ provides some quotes from the new ruling -

The Institute alleges—and we must accept as true for purposes of assessing its standing—that participating unenrolled preparers will gain a credential and a listing in the government directory. The Institute alleges—and we must accept as true for purposes of assessing its standing—that this will ‘dilute the value of a CPA’s credential in the market for tax-return-preparer services’ and permit unenrolled preparers to more effectively compete with and take business away from presumably higher-priced CPAs.”

As the Institute helpfully sums up, ‘because the Rule distorts the competitive marketplace and dilutes [Institute] members’ credentials by introducing a government-backed credential and government-sponsored public listing, it harms those members regardless of whether it also confuses consumers.’”

Nor do we see anything speculative or attenuated about the allegation that CPAs and their firms are more likely to lose business to an unenrolled preparer with a Record of Completion and a listing in the government directory than to an unenrolled preparer with no credentials at all.”

The bottom line – the AICPA fears that any government, or other, credential or designation that identifies a person’s competence and currency in 1040 preparation will take business away from CPAs.  Duh!  Of course it will – and it should!  The current erroneously presumed credentials of CPAs in the market for tax-return-preparer services should be diluted, as they are unrealistic.  Qualified unenrolled preparers should be able to more effectively compete with the urban tax myth that CPAs are automatically 1040 experts.  This does not “distort the competitive marketplace”, but instead improves the marketplace by providing taxpayers looking for a qualified tax preparer more information to help them make an informed decision.

The AICPA firmly believes, and has so told members in correspondence, that CPA’s “own” the tax preparation brand.  However it is a fact that the designation CPA, for Certified Public Accountant, is not a tax designation or credential.  It verifies the knowledge, competence, and currency in the practice of accounting of the holder, not the knowledge, competence, or currency in the preparation of individual tax returns.  Merely being able to display the initials CPA after one’s name in no way, shape or form indicates that the person with the initials knows his or her arse from a hole in the ground when it comes to preparing 1040s.

What is a Certified Public Accountant?

According to Wikepedia – “Certified Public Accountant (CPA) is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA”.

Merrian Webster defines a CPA as “an accountant who has met the requirements of a state law and has been granted a certificate”. And the free online dictionary says a CPA is “public accountant who has been certified by a state examining board as having met the state's legal requirements”.

The Investor Glossary gets more to the point – “A Certified Public Accountant (CPA) is a person licensed by a state board of accountancy to practice public accounting. The primary distinction between a Certified Public Accountant and all other accountants is that only a Certified Public Accountant can issue an opinion on audited financial statements.”

In order to become a CPA one must pass a difficult and lengthy exam, with minimal, if any, questions on 1040 tax preparation. There are also certain education and “apprenticeship” requirements, and a CPA must earn a minimum amount of CPE credits each year to maintain his/her initials, although there is no specific requirement that any of these CPE credits be in the area of taxation. The individual education, apprenticeship and CPE requirements may vary from state to state.

I am not a fan of the IRS voluntary AFSP “credential” (it does not provide any specific designation, but merely issues a “Record of Completion” for taking specific required CPE in taxation).  It has certainly not been greeted with an overwhelming response from “currently unenrolled” preparers.  For my thoughts on the program see my ACCOUNTING TODAY editorial “There Are So Many Things Wrong with the Annual Filing Season Program”.   But I see the need for a universally accepted 1040-preparation credential, with appropriate initials, administered not by the Internal Revenue Service but an independent industry-based organization, that would verify, recognize, and acknowledge the knowledge, competence, and currency of many “currently unenrolled” tax professionals.

If the AFSP continues I, personally, am not concerned about the loss of “representation rights”.  I will still be able to discuss the processing and contents of a 1040 I have prepared with the IRS, and assist clients with the response to any audit.  I have no desire to be the legal representative of any taxpayer, client or not, in proceedings before the IRS or the Department of the Treasury.  If I did I would have become an Enrolled Agent (EA) {I expect the AICPA would also try to do away with the EA credential if it could}. 

I do not necessarily agree with Russ in his belief that, “the one and only tax season for the AFSP was the past filing season”.  But if it is – so be it.  Let us hope that is will be replaced soon with some kind of non-IRS managed voluntary 1040 preparation credential.

As I do in every discussion like this - I do acknowledge that there are, and I know of some, CPAs who know their “stuff”, and some who are actually experts, when it comes to income taxes, and even some who charge reasonable fees (another issue).  It may actually be possible that the best tax preparer, at the best price, for your particular situation is a CPA.  But this is only because of the education, experience, ability, temperament, and other factors that are specific to that individual preparer, and nothing whatsoever to do with his or her possession of the initials CPA.


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