SO LONG, FAREWELL, AUF WIEDERSEHEN, GOOD NIGHT!

Joy to the world - tax season’s here.

I’ll soon be flush with cash!

Let every client be organized,

and give me all I need, and give me all I need,

and give me all I need to prepare their returns!

My 41st tax season will officially begin tomorrow - let the deluge begin!

As is my custom, due to the demands of the filing season I will be taking my annual “tax season hiatus” from posting to THE WANDERING TAX PRO, the NJ TAX PRACTICE BLOG, and THE TAX PROFESSIONAL.

Between now and April 16th I will barely have time to relieve myself let alone blog! I will NOT be answering emails from non-clients, nor will I have time to respond to comments. If a comment requires a response I will do so after April 17th.

I realize that I am abandoning you at a time when you may need me the most – but I need to make a living!

I find it a bit amusing that the period of time when TWTP gets the most “hits” is during the tax filing season when I am not posting.

“Talk” to you when it is all over!

RDF

BTW – be sure to check out THE WANDERING TAX PRO tomorrow for the annual posting of my TWELVE DAYS OF TAX SEASON!

FYI

I suggest you read my NJ TAX PRATICE BLOG post “Everybody Wants To Get Into The Act” - about a proposed NJ state tax preparer regulation regime.

RDF

TAXPRO BUZZ

+ NJ tax pros might want to check out my “review” of the annual NJ-NATP “Famous State Tax Seminar” here and here.

+ Professor Annette Nellen gives us some “Due Diligence Reminders for the 2012 Filing Season” in a piece at the AICPA STORE.

+ Joe Kristan tells us “IRS Issues Cents-Per-Mile Maximum Value for Employee Cars” at the ROTH AND COMPANY TAX UPDATE BLOG.

“The IRS has ruled (Rev. Proc. 2012-13) that you can't use cents-per-mile for cars costing more than $15,900, or trucks and vans costing more than $16,700.”

+ California tax pros might be interested in attending a conference on “Tax Reform: Status, Needs & Realities” sponsored by San Jose State University at Techmart in Santa Clara.  Click here for info.

+ TAX PREPARER CONNECTIONS has an “Early Tax Season 1040 Client Letter” for use by tax pros.

“Here is a sample of a letter you can send out to clients early in tax season. It is specific to tax changes for the tax year 2011, so you want to it out soon.

This is a great way to remind people of their tax appointment with you.”

+ David Williams, the IRS tax preparer regulation czar, sends words of greetings and update in “Happy New Year, Everyone”.

+ Veteran tax pro Eva Rosenberg, aka TAX MAMA (is there a TAX PAPA?), writes about her experiences in “Running a Tax Practice – Easy or Hard” at ACCOUNTING WEB.COM.

Pay special attention to Lessons 4 and 5 (I, too, speak from experience) -

“Lesson 4: People who haggle over your initial fee will never value you. Turn them away as clients. This is reported to me often by other tax professionals. Those who start out trying to push down your fees are the same ones who insist on calling you daily, with just a 'quick question' and never want to pay for the time you’ve tracked. Either dump them, or quote a high fee, requiring a retainer, that is always replenished BEFORE you take their calls or do their work.

Lesson 5: Get everything from your clients in writing. Do not accept information verbally. They will deny they ever said 'it', if 'it' turns out to be inconvenient for them. This only happened to me once. A doctor’s wife gave me some numbers on the phone. I prepared the tax return. The balance due shocked her. She decided to reduce their income amount, saying that she never told me their income was that high – that I made up the number. I kicked the client out – and never accepted anything verbally since. Your clients can provide information via letter, fax, or email. Save the document.”

+ The 2012 IRS Publication 15 (aka Circular E) – “Employer’s Tax Guide” is now available.  Click here to download.

RDF

AND THE BEAT GOES ON – FOLLOW UP TO MEASURING THE SUCCESS OF TAX PREPARER REGULATION

Joe Kristan replied to my post “Measuring the Success of Tax Preparer Regulation” in a post at the ROTH AND COMPANY TAX UPDATE BLOG titled “Preparer Regulation: Justified by its 'Mere Existence'?”

“A regulatory regime needs to meet a standard beyond its mere existence. To show that preparer regulation is worthwhile, the IRS should be able to demonstrate a significantly reduced error rate, improved tax compliance, and/or reduced fraud. If it can't demonstrate such benefits, it can't justify the $63 per preparer cost, the busy-work burden of the new IRS preparer-regulation bureaucracy, or the increased cost of preparation that the program will impose on the taxpaying public.”

While I would hope that the regulation regime, regardless of who manages it, does accomplish the goals Joe mentions, I still say it is worth it just to provide a credential to the previously unenrolled.  And as for justifying the $63.00 registration – whether or not there is any additional regulation or requirements, the IRS still does need a centralized registry of preparers. 

However, as, I believe, applying for a PTIN was free in the past, I don’t see the need for such a large fee just to get a number. 

I asked Joe what he thought of my suggestion for an independent industry-based organization to “manage” the RTRP credential, a AIRTRP similar to the AICPA.

“I'm perfectly happy with an independent accreditation agency, but not on the condition of it being the gatekeeper for a government-enforced credential for tax preparation. I actually think a private self-enforcing accreditation function would be a more credible credential.”

If done right the RTRP credential under an AIRTRP would be no more “government-enforced” than the CPA designation is under the AICPA.

Jason Dinesen, whose original post “Six Tax Predictions for 2012” started the discussion in the first place, initially submitted a comment to my post -  

“1. We all now have PTINs. That alone should make it easier (theoretically) to see who the unethical preparers are. They can be weeded out by barring their PTIN.

2. I don't think that passing the RTRP exam proves ‘competency’. It's an open-book exam and Publication 17 is the open-book reference guide, for crying out loud! It is a barrier to entry that will scare off many casual preparers, which is good. But I think mandatory PTINs alone would scare the casual preparer off. 

I agree that all the IRS really needs is a central registry of preparers – which is accomplished by the requirement to register and receive a PTIN.  The IRS really has no need to manage the “Registered Tax Return Preparer” credential via testing and checking CPE requirements.

It is true that an open book test does not prove competence beyond doubt.  Yet we do indeed prepare 1040s with an “open book”.  The test should not be about memorizing current law, since it changes so often.  If there is to be a test It should be about 1040 concepts.  I personally think the annual CPE requirements in federal taxation are a better way to insure currency and competence. 

Jason promised to post further on the subject at his DINESEN TAX TIMES blog, and has done so in “Thoughts on Preparer Regulation”.   Here Jason seems to be siding with Joe Kristan. 

He makes some good points, but he does not comment on my suggestion for an independent industry-managed RTRP designation.   

Trish McIntire of OUR TAXING TIMES also submitted a comment to my post -

“An outside agency to regulate tax preparers?  Okay. How do you create one? I can’t think of any organizations that regulate their industry and are independent of the government. ABA, AMA, labor unions may do a little regulation for self-protection but for the most part they’re advocates for their members. Congress could set one up. But do you really want Congress messing with this? Take a look at all the tax preparer regulation bills that they created and could never get into law. They’re not a good choice. We could look at the states but that could mean dealing with different regulations and testing for each state. Sorry, but the IRS is the logical choice for a national program.

How much of the ire with the IRS doing the regulating is coming from tax pros who hate the IRS, don’t like the Commissioner, or disagree with aspects of the new rules? Or they point to the new crackdown on EITC due diligence or those ‘mistake’ letters which went out a few months ago. The big bad IRS is in charge. 

The PTIN regulations just went into effect a year ago. Most of the other regulations are still getting phased in. There have been set backs and changes but that’s to be expected with a new program. In fact, I’d rather they be flexible and make changes to get a better program.

I’m going to give the IRS the chance to do what they set out to do. Now, that doesn’t mean I won’t gripe and blog about issues with the program and when they don’t keep their promises. (When are the letters to taxpayers who filed self-prepared returns but they really look like a tax preparer did them coming out?) But I know that the IRS has a lot of eyes looking over their shoulders at the licensing program (TIGTA, TAS, NATP, NAEA, AICPA, ASA, tax bloggers…) so I’m going to let them finish implementing the program.” 

The government does not manage the CPA or bar exams, nor does it issue the CPA or JD credential.  I do believe that the AICPA and the ABA are truly independent of government.  The only credential that the IRS manages is EA (Enrolled Agent).  The IRS can prevent a CPA or JD from preparing taxes, or practicing before the IRS, if “bad behavior” is proven, but I do not believe they can take away a CPA or JD designation.  The AIRTRP would be no different from the AICPA, the ABA, or, for that matter, the AIA for architects or the AMA for physicians.   

Providing a recognized set of initials for “unenrolled” tax return preparers is not a new idea.  There have been many attempts in the past at a privately-maintained tax preparer credential.

Many years ago the National Society of Tax Professionals tried to establish a tax preparer designation - I think it was Certified Tax Preparer or something like that - through a subsidiary accreditation organization. 

The National Society of Accountants set up a credential program through The Accreditation Council for Accountancy and Taxation® (ACAT) which offered the designations Accredited Tax Advisor (ATA) and Accredited Tax Preparer (ATP). 

And there is currently an American Institute of Certified Tax Coaches which issues a Certified Tax Coach (CTC) designation.

Other organizations and businesses have offered the Professional Tax Preparer (PTP), Certified Tax Specialist (CTS), and Chartered Tax Professional (CTP) designations.

All these credentialing attempts failed because they were initiated and maintained by one organization or profit-making business and did not have industry-wide representation or support.  To be successful the AIRTRP must be independent and sponsored by all representatives (i.e. non-profit membership organizations) of the tax-preparation community.

So, my fellow tax professionals, what do you think of an independent industry-related regulatory organization to replace the IRS in managing the RTRP credential?  Let’s keep the discussion going.

RDF    

TAX PRO BUZZ

+ The Pacific Northwest Tax School has issued a report on “IRS Registered Tax Preparer (RTRP) Regulations: Challenges and Opportunities For the Tax Preparation Industry” that is worth reading.

+ The CALIFORNIA TAX ATTORNEY BLOG, written by Mitchell A. Port, tells us that there are now “Two New Types of Corporations In California”.

“California became the seventh state to adopt two new subtypes of stock corporations — a ‘flexible purpose corporation’ and a ‘benefit corporation’ as of January 1, 2012. Now, investors and entrepreneurs can pursue both social and economic objectives allowed by the new corporation subtypes.”

The other six states that currently allow at least the Benefit Corporation are Hawaii, Maryland, Virginia, Vermont, New York, and, a surprise to me, New Jersey.  Other states have legislation pending to create such a corporate variation.

+ The JOURNAL OF ACCOUNTANCY reports that “IRS PTIN System Continues to Accept 2011 Renewals” -

“The IRS online system to apply for a new preparer tax identification number (PTIN) is back up and running after a two-week hiatus for maintenance. In addition, the system is continuing to accept 2011 PTIN renewals even though the Dec. 31, 2011, renewal deadline has passed.”

+ The original BUZZ over at THE WANDERING TAX PRO also has some great info and resources for tax professionals.  It appears at TWTP every Wednesday and Saturday.

RDF

THANK GOD FOR SMALL FAVORS!

This year we tax professionals are given three (3) additional 12+ hour days to complete 1040s (and 1040As)!

As fellow tax blogger Joe Kristan put it, April 15 is April 17 this year.  Plus, as it is a leap year, there is a February 29 in 2012.

I no longer work on 1040s on April 15^th, or whenever the last day of the “season” is.  TWTP readers know this is because of Maurice “Moe” Barry, a client who always came in to have his return done on the last day.  He would then take his signed finished returns to the main post office in New York City to partake of the special activities of the day held there each year.

One year Moe can in on April 12^th and we sent him away – telling him to come back on the 15^th.  This is because when we saw Moe we knew it was almost over (there was another consistent last day client who came to us in the early evening – his appearance meant that it was indeed over).

Moe Barry, a PATH police officer, was one of the Port Authority Emergency Response Team members who was killed on 9/11.

I usually stop working on 1040s (and 1040As) on April 13^th, or the second day before the deadline.  This way I can get finished returns in the mail via Express Mail on the morning of the 14^th (or this year the 16^th) and have them in the clients’ hands in time for a deadline postmark.  On the day before the deadline I write up all the GD extensions so they will be in the mail by the deadline.

While for the past few years I have returned to work on the GD extensions on the day after the due date, this year I will begin my much-needed and richly-deserved post tax season recovery at the Jersey shore on April 18^th, returning to my desk and the inevitable GDEs on April 23^rd.

I do appreciate having the extra 3 days – or about 40 hours – to try to keep the GD extensions to a true minimum.   

TAFN

MEASURING THE SUCCESS OF TAX PREPARER REGULATION

In commenting on “Six Tax Predictions for 2012” by EA Jason Dinesen of Iowa from his DINESEN TAX TIMES blog I “tweeted” –

“I agree with all except #6.”

Here is #6 -

“6. IRS efforts to regulate preparers will not have the desired effect, in 2012 or beyond. I think the result of this bureaucracy that is being created is that more burdens and annoyances will be placed on preparers, with no discernible benefit to consumers.*

Jason included a note -

“Clarification to #6 based on reader feedback — I do think preparer regulation is good in theory. I just really question if the IRS can execute the oversight effectively. I’ll write more on this in a future blog post.”

I received the following “tweets” in response to my comment:

“But we knew you disagree w/that one. Curious, Robert: how would you measure success for preparer regs next year?”  from Joe Kristan

“I used to be for preparer regulation but am now jaded. I don't think the IRS can possibly administer it effectively.“ from Jason Dinesen

Joe raised a good question.  Since I obviously cannot address it properly in 140 characters I have decided to answer here.

The question again – How would you measure success for tax preparer regulation in 2012?  

Let me begin by saying that I agree that the IRS may not be the ideal organization to administer the regulation of tax return preparers.  But such regulation does somewhat fit into Publication 230, and the IRS has historically regulated “previously unenrolled” preparers under Pub 230 – although the regulation of CPAs, EAs and attorneys had been in the area of “representation before the IRS”.  The IRS has now brought all preparers under Pub 230 by adding “preparation” to “representation”.

I believe that “preparation” is truly separate from “representation” and this separation should be officially recognized.  So if the IRS does not have the ability to regulate “preparation” who should administer such regulation?

The last thing I would ever want is for the idiots in Congress to regulate tax return preparers.  The alternative, I expect, is a kind of “American Institute of Registered Tax Return Preparers” – independent industry-based regulation.  This organization could have on its board a representative from the IRS as well as from other industry components such as AICPA, ABA, NSA, and NATP. 

Registration and issuance of the PTIN would remain with the IRS, as the IRS does have a need for some kind of registry.  But the independent organization would “control” the RTRP designation and the background checks, testing, and CPE maintenance functions.  The IRS would officially recognize the AIRTRP as the governing authority for the RTRP designation, though the IRS would be able to suspend or remove this title if appropriate due to pre-regulation Pub 230 or other existing preparer penalty violations.

If I have to provide my fingerprints to someone in order to continue to practice my profession, I would rather give them to an independent, non-governmental agency, than to the IRS, even if they “promise” not to use them for anything else than to see if the person has a felony conviction and to destroy them after the background check has been conducted.

The official rule would be that only RTRP’s and EAs (here I would change the designation to ETRP – Enrolled Tax Return Preparer – to do away with the current confusion, and continue to have that designation maintained by the IRS) would be permitted to prepare federal individual income tax returns for a fee.  I would have the AIRTRP “grandfather” certain experienced preparers out of the testing requirement but maintain the annual 15 hour CPE in federal tax topics requirement.  

EAs, or ETRPs, would not be governed by the AIRTRP, as they would not need the RTRP designation.  But CPAs and attorneys who wish to prepare Series 1040 returns (I do believe that CPAs should probably be exempt from testing for corporate, partnership, trust, and estate returns – and that a second level of testing eventually be instituted for RTRPs who want to prepare these returns) and their “supervised employees”, would be required to be tested, unless “grandfathered”, and maintain 15 hours of CPE in federal tax topics (or rather 13 hours, as they probably already have the 2 hour ethics requirement to maintain their current designation), and would be given the RTRP designation in addition to their current initials – Joe Kristan, CPA, RTRP.

Again – only RTRPs and EAs (ETRPs) would be allowed by law to prepare federal 1040 series returns.

Having an independent AIRTRP would also avoid the apparent statutory requirement that CPAs and attorneys cannot be further regulated by a government agency, and therefore do away with the legal need for their exemption from testing and CPE maintenance.  Obviously the CPE in federal tax topics would be a part of their current CPE requirements, and not in addition to.   

But I have not yet addressed Joe’s question (in case you forgot it is - How would you measure success for tax preparer regulation in 2012?).

I have always agreed with Joe Kristan that the regulation of tax return preparers will not do away with unscrupulous “ghost preparers” (although I do think it will make a small dent).  Crooked preparers will find crooked taxpayers, and vice versa, regardless of regulation.  Currently crooked corporate executives find crooked CPAs and attorneys with ease.  And the classic example – the regulation of CPAs did not stop the Enron mess.

I do think it will do away with the “casual” preparer (and Joe agrees), who honestly thinks he knows how to properly prepare federal income tax returns and does a dozen or so.  I think this is a good thing.  We should see less signs announcing “Tax Returns Prepared Here” at barbershops and “beauty parlors”, auto sales lots, check cashing outlets, real estate and insurance sales offices, etc, etc, etc.    

It will be difficult to truly measure the success of the regulation concept until the issuance of the RTRP designation is fully phased in – which will not be until December 31, 2013 (as we have until then to take and pass the competency test).

If there is any success with the program for 2012 it will require that the IRS aggressively publicize the fact that only those individuals who have registered and received a PTIN are allowed by law to prepare 1040s for a fee, to, as promised, aggressively seek out taxpayers who have filed alleged “self-prepared” returns that appear to have been prepared by ghost preparers, and to assess serious fines and penalties on these taxpayers once caught.

The ultimate benefit of the regulation regime, regardless of who administers it, is the mere existence of the RTRP designation – giving credibility to us qualified and competent “previously unenrolled” preparers, and providing the taxpayer public with some kind of proof that a person is at least basically knowledgeable and competent in 1040 preparation.

And, if my suggestions were followed, debunk the “urban tax myth” that all CPAs are 1040 experts by virtue of their initials.

So, Joe and Jason, and other tax professionals, what do you think?

RDF