Friday, October 19, 2012

THERE MUST BE GRANDFATHERING!


Saturday’s BUZZ installment at my TWTP blog will lead off with the following item -

The IRS has issued “Return Preparer Office Federal Tax Return Preparer Statistics” with up-to-date data current as of 10/01/2012.

It appears that there are still 325,203 “preparers with provisional PTINs who have not yet passed the RTRP test”.  I am not alone.

This past summer I attended the National Association of Tax Professionals’ annual conference in Baltimore.  The keynote speaker was former IRS Tax Pro Regulation “czar” David Williams, who talked about the progress of the new regulation regime.  In my post “Greetings from Baltimore” here at TPP I reported on the statistics provided by David in his address -

There are currently 3,269 previously unenrolled tax professionals who have taken and passed the initial competency test to receive the new RTRP (Registered Tax Return Preparer) designation.  This leaves almost 339,000 RTRP “candidates” – previously unenrolled preparers who need to take and pass the test by December 31, 2013 (I am in this number).  That is a lot of tax preparers.”

The current data indicates that as of October 1st there are 22,332 Registered Tax Return Preparers.  So since the summer only 19,000 more previously unenrolled, and some Enrolled Agents who did not need to take the test, have taken and passed the test.

There are only about 14½ months left before the December 31, 2013 deadline for “provisional” tax return preparers to take and pass the RTRP competency test.  Will that be enough time for the 325,000+ to do so?  To be perfectly honest, I doubt it very much.  It may be a logistic impossibility.

Yet the IRS and its new regulation regime czar continue to state that it will not extend the deadline.

So what will happen if on December 31, 2013, there are still 250,000 or more tax preparers have not taken the test?   Will the IRS put them, many if not most of whom will no doubt be veteran experienced and highly competent and ethical tax professionals like me, out of business?

To do so would be a disaster for both taxpayers and the IRS. 

The issue is not that the deadline should be extended – but that the IRS must enact some kind of “grandfathering”.

Why has the IRS resisted such grandfathering?  They already exempt all CPAs, attorneys, and “supervised employees”, regardless of ability, training, or experience in 1040 preparation, from having to prove any degree of competency by taking the test, which is about 42% of the current PTIN-holder base.  So they cannot really be that concerned about the competence of registered tax return preparers.

The main purpose of the regulation regime was to establish a registry of tax return preparers.  The requirement to register and receive a PTIN takes care of this.  The creation of a RTRP designation is good for the taxpaying public, as is the requirement for minimum annual CPE in federal taxation to maintain the designation.  And, going forward, it may also be a good idea to require new individuals who are entering the business to be tested as part of the RTRP process.

But, as I have said all along, why should I, who have been preparing 1040s continually without incident for 40 years, and others like me be forced to take a test now to prove that I knew what I have been doing all these years?

I have suggested that the IRS 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.  As the current annual requirement is 15 hours of CPE per year, I would accept a minimum of 45 hours over 3 years.

Unless the IRS is truly planning to put perhaps a quarter of a million qualified and ethical tax return preparers out of business it must accept grandfathering!

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