Wednesday, November 9, 2011


From the beginning, we planned to exempt CPAs, attorneys, and enrolled agents from the testing and continuing education requirements as you already have more stringent testing and education requirements.”

This is very misleading – if not an outright lie.   The CPA exam and the bar exam are obviously more “stringent” tests, and CPAs, and I expect attorneys, have more stringent CPE requirements in terms of actual hours.  But only EAs are tested on federal taxation and are required to maintain CPE in federal taxation.  The CPA and bar exams may have a few tax questions, but these are, again I expect, questions on business taxation and not on 1040 issues.  This is like saying that Architects, Medical Doctors and Engineers should be exempt from the RTRP exam because they have already been subject to stringent testing. 

There is nothing in the CPA or bar exam that comes anywhere close to the RTRP competency test when it comes to preparing 1040s.  If the IRS will eventually require different tests for corporate and partnership tax preparation I would very likely support exempting CPAs from this separate test.

The only possible reason for even considering exempting CPAs and attorneys from testing and CPE has been mentioned, and discounted, in my earlier post on “Practice Vs Represent”.  Shulman’s above-quoted comment is just arse-kissing horse puckey! 

But we received valuable input from stakeholders, including the AICPA, that helped us create what I think is a better overall final product. Let me highlight a few examples.

First, is the creation of a “supervised preparer” category which makes a lot of common sense to us …and to you. We refined the rules that we initially proposed to provide greater flexibility for people who work in a professional firm and prepare returns under the supervision of an accountant, enrolled agent or attorney.

These supervised preparers must obtain a PTIN and renew it each year, but they will be exempt from competency testing and continuing education requirements. You’ve been helpful to us in determining how to define the supervised preparer category… how to program our online system regarding it …and how we should notify the supervisors.”

The exemption of “supervised preparers” makes even less sense than the exemption of CPAs and attorneys.  From my experience, albeit many years ago, the actual “supervision” by CPAs is minimal, if there is any true “supervision” of the actual 1040 preparation.  The “non-CPA” employee is the person who actually prepares the 1040, with the CPA merely signing off on the return. 

When I was an employee of one of the at the time “big eight” firms I came across a tax return that was prepared by a “non-CPA”, and signed-off by a supervisor CPA, a CPA from the firm’s Tax Department, and the CPA “partner-in-charge” of the department.  The return was prepared incorrectly.

The “supervised” employees have no required formal training or education in 1040 preparation, and their competence is not validated by any testing or CPE requirements.

Second, while we want to ensure a minimum level of competency in the preparer community, we do not want newly-registered return preparers to oversell what this means. Therefore, we created a disclaimer statement for individuals who will be future Registered Tax Return Preparers. This was to ensure that registration with the IRS is not viewed as an endorsement by the IRS.

And so, Registered Tax Return Preparers will need to include a clear statement on any paid advertising involving print, television or radio that ‘the IRS does not endorse any particular individual tax return preparer’, and that more information is available about this on”

I agree that the IRS should not “endorse” the fact that an RTRP is automatically competent or ethical by virtue of being endowed with the initials, just as I believe that the IRS should not in any way “endorse” the CPA or JD credentials as being a guarantee of competence, currency or ethical conduct. 

But I do not want this “disclaimer” to in any way continue the “urban tax myth” that a person with the initials CPA is automatically a tax expert.

A person receiving the initials RTRP, like one designated an EA, has proven basic competence and currency in 1040 preparation, while a person with the initials CPA or JD has not.  This should be included in the disclaimer.

To be fair, I applaud the Commissioner’s statement (the highlight is mine) –

And fourth, we have received input on the recent background check and fingerprinting proposals. While we all share the same goal of ensuring that there is adequate due diligence on people entering this field, the AICPA and others have made a number of important points that we need to think through regarding how best to do this.

And so we’ve decided to hold off on fingerprinting as we consider the issues that have been raised, and have further discussions with interested parties.”

I trust that Shulman refers to the fingerprinting of all registered tax preparers, and not just CPAs and attorneys.

He also speaks of –

Therefore, we have a comprehensive strategy to focus on preparer enforcement and compliance. This year, we are focusing on two categories of preparers. First, are those preparers whose clients’ returns send out a warning signal of serious problems with accuracy and errors. We are also focusing on those preparers who are not signing returns and identifying themselves with a PTIN, also known as “ghost preparers.”

Shulman talks about of sending letters to and investigating preparers “who have been identified as ‘high risk’” and “whose clients’ returns contain traits commonly associated with highly questionable Earned Income Tax Credit claims”.  And he promises “in-person visits focused on return preparers we’ve identified as ‘egregious’ with high error rates”.  This is fine, but it only one area or approach.

He talks about “ratcheting up our efforts to identify ‘ghost preparers’”.  But what about the letters to taxpayers with complicated or questionable “self-prepared” returns to verify that these individuals did not engage “ghost preparers” who did not sign the return, as promised by Dave Williams at the NATP Conference in Austin? Taxpayers who use unregistered preparers should be penalized and fined for so doing.


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