Below is the text of a letter I have mailed to Carol Campbell, David Williams’ replacement as Director of the IRS Return Preparer Office -
Dear Ms Campbell:
Congratulations on your recent appointment as the new Director of the IRS Return Preparer Office.
I have been preparing 1040s for individuals in all walks of life without incident since February of 1972. FYI - during my 40+ years in “the business” I have never used flawed and expensive tax preparation software to prepare an individual income tax return. Each year I prepare about 400 sets of income tax returns manually.
I am the author of the popular tax “weblogs” THE WANDERING TAX PRO (http://wanderingtaxpro.blogspot.com), around since the summer of 2001, THE TAX PROFESSIONAL (http://thetaxprofessional.blogspot.com), and the NEW JERSEY TAX PRACTICE BLOG (http://njtaxpractice.blogspot.com), and also write on tax planning and preparation topics for TheStreet.com and its sister site MainStreet.com, and the publications of the National Association of Tax Professionals, of which I have been a member for 25 years, and its New Jersey chapter.
I have been a vocal supporter of the concept of registering and regulating tax return preparers, and of the Registered Tax Return Preparer designation, since it was first introduced by Commissioner Shulman, although I do take serious exception to some of the requirements of the current regulation regime.
I very strongly believe that long-time experienced tax professionals who remain current in tax law, like myself, should be exempt from the initial competency examination as a requirement for receiving the RTRP designation under some kind of “grandfathering”.
I am not saying that years in the business automatically equals competency. There are preparers who have been around for 3 or 4 decades who are not sufficiently competent and current in today’s tax law. My formula for “grandfathering” is years of experience + proof of extensive ongoing professional education.
I would exempt from the initial competency test all paid tax return preparers who have consistently been preparing 1040s full time (I mean during the tax season – not 40 hours a week all year round) for at least 5 full years (60 months) prior to registering for a PTIN, and who have earned a minimum of 50 hours of CPE in federal income taxation topics during the previous 3-year (36 months) period.
To be perfectly honest - after preparing tax returns competently, professionally, and ethically for over 40 years I find it somewhat demeaning to be forced to take a test to prove that I know what I have been doing all this time.
The fact that 300,000+ potential RTRPs have not yet taken the initial competency exam with less than 16 months left before the clock runs out almost demands some kind of grandfathering. It does no good for the IRS, or the taxpayer public, to force tens of thousands of competent and experienced tax professionals out of business, or cause them to go “underground” and become “phantom” preparers.
I also strongly believe that CPAs and attorneys who want to prepare federal income tax returns for compensation, and who would not be exempt under the previously discussed grandfathering, should be required to take the initial competency examination and maintain the required annual 16 hours of continuing professional education in federal taxation topics in order to do so – just like the rest of us. Only Enrolled Agents should be exempt from the RTRP requirements.
For years Certified Public Accountants have unduly benefited from an erroneous “urban tax myth” that a CPA is automatically a tax expert by merely possessing the initials. The current exemption of CPAs from demonstrating competence and currency in federal individual income tax only adds to this myth.
Your predecessor, David Williams, and other high-level IRS officials have acknowledged that the CPA exam and the bar exam are not tests of 1040 tax knowledge, and “blame” the exemption from testing and CPE requirements on a federal statute and an erroneous confusion of “preparing tax returns” with “practicing before the IRS”.
I am aware that there are many competent tax experts currently in practice who are CPAs. However this is because of the specific training, experience, and continuing education of the individual, and has absolutely nothing to do with having once passed the CPA exam.
I have absolutely no problem with the 16 hour annual CPE requirement for maintaining one’s PTIN and RTRP status. I have taken, on average, much more than 16 hours of CPE in federal and state taxation per year for at least the past 25 years. My only concern is requiring preparers to waste time and money on 2 hours of “ethics” each and every year. 2 hours of ethics in the first year of registration and 1 hour of ethics updates every two or three years thereafter would be sufficient.
While I feel that regulation of professional tax preparers would be better handled by an independent industry-based organization, such as an “American Institute of Registered Tax Return Preparers”, I certainly prefer having the Internal Revenue Service regulate preparers as it now does to having Congress legislate regulation.
I would like to see the IRS create a “civilian advisory committee” to its Return Preparer Office, similar to the “civilian advisory committees” already in existence for other IRS functions, and would gladly volunteer to serve on such an entity.
Thank you for allowing me to give you my thoughts on the IRS tax return preparer regulation regime. If I can be of any help to you or your office in the future please do not hesitate to contact me.
Robert D Flach