Monday, September 27, 2021


Once again, the issue of tax preparer regulation is in the news.  There has recently been talk of giving the IRS the authority to regulate all preparers via proposed economic and budget legislation and of a revival of the Registered Tax Return Preparer (RTRP) program that was done away with by the US Tax Court in January of 2013.

The Internal Revenue Service already regulates preparers, those permitted to “practice” before the IRS, like CPAs, attorneys and Enrolled Agents, and “unenrolled” preparers, via Circular 230.  

I do not oppose requiring PTIN-holders to complete a minimum number of CPE hours in federal income taxation to maintain their PTIN.  In fact, I support this.  It is vital that every sincere and competent paid Form 1040 tax preparer take CPE in income taxation each year to keep up-to-date on tax law changes.  I have taken on average at least 16 hours of CPE in federal income taxation each year consistently for decades. 

I do oppose requiring all paid tax preparers to take a government-administered competency test, either one time or annually, to maintain their PTIN and continue to be allowed to prepare tax returns.  I would only support a one-time initial competency test if there was a grandfathering exemption for tax preparers who have been consistently preparing 1040s for at least 5 years.  After 50 tax seasons of preparing 1040s without incident I have no intention of taking a test now to prove I know what I have been doing for all these years..

I do support voluntary Form 1040 competency designations that recognize and identify the competence of unenrolled 1040 preparers.  Such a program would benefit the tax preparation industry, the taxpayer public, and the federal government. 

Currently any Tom, Dick or Harriet can hang out a shingle as a “tax preparer,” regardless of education or ability.  And, thanks to tax preparation software, any Tom, Dick or Harriet, with absolutely no training, experience or knowledge, can simply purchase a tax preparation software package and try to pass themselves off as a “tax professional”.  The taxpayer public does need a way to determine the relative competence of a potential tax preparer.

I would support the Internal Revenue Service establishing an RTRP designation as part of a voluntary two-tiered certification program that includes the current Enrolled Agent designation.

A voluntary Form 1040 competency designation would allow qualified “unenrolled” preparers the acknowledgement they deserve based on their knowledge and experience. Allowing CPAs and attorneys who prepare tax returns to become an RTRP under the new voluntary program would provide these professionals with a credential in 1040 preparation, and therefore provide recognition of their competence and currency in preparing individual income tax returns.  The CPA designation alone does not indicate the holder has any competence or currency in 1040 preparation.

A preparer, including CPAs and attorneys, would first apply for and be granted the RTRP designation by way of a test that is limited to Form 1040 preparation.  Minimum annual CPE in federal tax topics would be required once the RTRP designation was granted.  

After a year, an RTRP could elect to take a second test, with emphasis on taxpayer representation issues and other advanced topics, to become an ETRP (Enrolled Tax Return Preparer), a new title for the current Enrolled Agent (EA), and be permitted to “practice” before the IRS.  CPAs and attorneys who become RTRPs would have no need to go on to become an ETRP, as they are already permitted to practice before the IRS.

What I strongly believe should be done is to create a national board consisting of representatives of all current tax return industry membership organizations to issue and maintain a universally accepted independent voluntary professional designation – CTRP for Certified Tax Return Preparer - based on testing and maintained by required annual continuing professional education in federal taxation.

In the case of all other professions, like CPAs, attorneys, architects and medical doctors, the maintenance of the professional certification designation is done by an independent industry-based organization such as the American Institute of CPAs, the American Bar Association, the American Institute of Architects, and the American Medical Association.  The new 1040 credential would be administered by the National Institute of Certified Tax Return Preparers.

The Institute would be an independent, nonprofit organization established solely for the purpose of issuing, maintaining and promoting the CTRP designation. Its governing board would consist of a representative (perhaps the executive director or board president) of the National Association of Tax Professionals, the National Society of Tax Professionals, the National Society of Accountants, the AICPA, the American Bar Association, and any other appropriate tax-related membership organization, and at least two independent “previously unenrolled” practicing tax professionals.

In order to be designated as a CTRP, a candidate must possess a valid PTIN and pass a competency test on federal 1040 tax law. A “grandfathering exemption” from this test would be allowed for:

• Tax professionals who have been consistently preparing federal income tax returns on at least a half-time basis (during the traditional tax filing season) for at least five full years and who have successfully completed a total of 48 hours of continuing professional education in federal taxation in the three-year period (36 months) prior to applying for the designation.

• Tax professionals who have been licensed or certified to prepare income tax returns under a required state program that includes a competency test.

• Individuals who have successfully completed a certificate or certification program in federal income taxation offered by an accredited educational institution or a qualified membership organization that includes testing, like the tax programs of Accreditation Council for Accountancy and Taxation (ACAT).

CTRPs would need to renew their designation every three years by submitting proof of completion of a total of 48 hours of CPE in federal taxation during the three-year period, with at least eight hours each year. The 48 hours must include three hours of “tax updates” per year (a total of nine hours) and one hour of “ethics updates” during the three-year period.

Qualified CPE providers would include accredited educational institutions and organizations/companies accepted by the National Registry of CPE Sponsors. The NICTRP would not need to separately approve CPE providers.

CPAs and attorneys would be welcome to apply for voluntary certification under the National Institute of CTRPs as a way to acknowledge and identify their knowledge of and currency in 1040 preparation.

With the institution of such a voluntary certification program taxpayers will be able to identify true “tax professionals” from among the choices they are faced with.  More accurate and competent returns will be prepared. And competent, experienced and ethical “previously unenrolled” tax preparers will finally receive the recognition and respect that they deserve. Everyone benefits.  

So, fellow tax pros, what do you think? 


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