Wednesday, September 25, 2013

SO LONG, FAREWELL, AUF WIEDERSEHEN, GOODBYE!

As has so often been the case these past 40+ years, “my eyes are bigger than my stomach” so to speak.
 
With the success of THE WANDERING TAX PRO, created for the average middle class taxpayer, I wanted to also write a blog specifically for tax professionals.  I first started the NJ TAX PRACTICE BLOG for NJ tax pros and then THE TAX PROFESSIONAL for all tax pros.
 
Unfortunately I do not have the time to maintain three, or even two blogs, and there is not enough content to keep three, or, again, even two, blogs going 5, or even 3, days a week.  I first closed the NJ TAX PRACTICE BLOG, and now must also put an end to THE TAX PROFESSIONAL.
 
I will keep this blog up, although will no longer post to it, so that you can access the archives.  And I will continue to, on occasion, as a breaking story or the spirit moves me, write posts specifically for tax professionals, from NJ or wherever, at THE WANDERING TAX PRO.
 
TAFG 

Tuesday, August 20, 2013

A "SEASONED" TAX PRO RESPONDS


Over at TAX FACTOR Jamaal Solomon’s “Confessions of a Mad Tax Accountant” continue with the promised "Arrogance of Some (Not All) Old Tax Accountants (30+ years' experience)”.
 
Jamaal advises -

My advice to young tax professional is not to be shy. Young professionals MUST seek advice from ‘seasoned’ tax professionals. You will meet some jerks but hey that’s life! You have to keep on striving for excellence. My advice to ‘seasoned’ tax professionals is don’t be greedy. ‘Seasoned’ professionals MUST share their knowledge.”

In looking back at my more than 4 decades in the business, the only “seasoned” tax pro from whom I actively sought advice during my earlier years was my teacher and mentor James P Gill.  We worked together just short of 30 tax seasons, and he eventually “handed over” his practice to me when he got tired of 1040s at age 75.  To be honest, while I have been attending NATP and other conferences for over 25 years, I did not begin to “network” with other tax pros until only very recently. 

Over the years I obviously received guidance from “seasoned” seminar and workshop leaders at NATP, NSTP and other continuing professional education sessions via their presentations.  And since I began blogging - around the time my mentor went to his final audit - I have sought guidance and help on tax preparation issues from time to time from my fellow tax bloggers (especially the MISSOURI TAXGUY, who actually credits me as one of the reasons he started to blog) – some less “seasoned” than myself.  Different tax preparers have different areas of experience and expertise.

From the odd questions and comments presented during my tenure at various CPE sessions by participant tax preparers, who one would think to be “seasoned” based on years, I have come across many that seem to need a lot more “seasoning”.  Years in the business alone does not necessarily yield “seasoning”.   

I like to think I am one of the “great ‘seasoned’ tax professionals” that JS refers to in his post.  I have tried to be supportive, and provide guidance, support, and publicity (via BUZZ), to new tax bloggers, Jamaal included, over the dozen years I have been writing THE WANDERING TAX PRO.

I do agree with JS that “seasoned” tax pros need to share their experience with newbies, and new tax pros need to seek out “seasoned” mentors.

FYI, Jamaal and I, a “young” tax pro and a “seasoned” tax pro, will soon be providing guidance, advice, and resources for beginning tax preparers in a book that we are currently working on with the tentative working title “Won’t You Take This Advice I Hand You Like a Brother”.  I apologize to JS for not devoting more time to my contributions to the manuscript lately, but I have been plagued by GD extensions.

Next up for JS – turnabout is fair play with “Arrogance of Some Young Tax Professionals”.  I am looking forward to this next post almost as much as I was looking forward to the current one.

RDF

Monday, August 19, 2013

TAXPRO BUZZ


+ The madness continues.  Jamaal Solomon talks about: “Receiving CPE Offers” in “Confessions of a Mad Tax Accountant #4”.

I, too, have noticed that many new CPE providers have sprung up, and have solicited me via email, since the IRS initiated its now hopefully defunct required RTRP regime.  And new RTRP-related membership organizations, most really thinly-veiled profit-making CPE providers also appeared.

While I have attended CPE from various providers and organizations over the years, lately I have limited my CPE to NATP and the NJ chapter, but I also recommend the IRS Nationwide Tax Forum.  Unlike JS, I do not complain about CPE emails, as I am always looking for new legitimate providers either nearby or at locations I would like to visit.

I look forward to the next installment in the Mad Tax Accountant series – “Arrogance of Some (Not All) Old Accountants (30+ years)”.

+ The always on the ball ACCOUNTING TODAY gives us the word that “IRS Postpones Shutdown of Online e-Services Apps” -

The Internal Revenue Service said Friday that it is delaying the planned retirement of its Disclosure Authorization and Electronic Account Resolution online applications for three weeks.”

+ The IRS has issued draft copies of a lot of 2013 forms and instructions recently.  Click here to check them out.

+ Diane Gilabert explores “The Section 199 Deduction – 9 True/False Questions” at her TAX MAVEN BLOG –

The section 199 deduction is one of the most overlooked tax breaks for businesses. The alphabet soup of acronyms is intimidating. But a potential tax deduction of 9% of qualifying taxable income is too compelling to pass up.”  

+ And DG also provides a detailed “Purchase Price Allocation Example” for reporting the sale of a business.

RDF

Monday, August 12, 2013

TAXPRO BUZZ


+ “Psychopathic CPAs? Not Likely”.  I don’t know about that.

Bill Sheridan of the MARYLAND ASSOCIATION OF CPAS suggests that, according to the Great British Psychopath Survey, “If you're a CPA, here's a bit of good news: You're probably not a psychopath.”

It is no surprise that #2 on the list of the most psychopathic professions is Lawyer.  With some exceptions, I have always thought of lawyers as #2.

+ TAX MAVEN Diane Gilabert lists “5 Things Bill Belichick can Teach us About Winning an IRS Audit”, the third installment in her series on IRS audits.

To be honest, until I read the post I had no idea who Bill Belichick was.  The only sport I follow is bowling. 


+ TAX PROFESSIONALS RESOURCE has a great inventory of “Tax Articles”.

+ FYI, the “other NSA” is offering an online seminar on “Financially Distressed Taxpayers: Cancellation of Debt, Foreclosures and Repossessions” on August 27th at 2:00 PM EDT, 1:00 PM CDT, 12:00 PM MDT, 11:00 AM PDT.

RDF

Monday, August 5, 2013

TAXPRO BUZZ


Finally a “meaty” Taxpro BUZZ!

+ Jamaal Solomon has posted #2 of his series of “Confessions of a Mad Tax Accountant” - “Dealing With Bum Clients”. 

I agree when JS says -

There is nothing wrong with firing bum clients. Life is too and complex to deal with them! Firing bum clients will give you more time to concentrate on your valuable clients.” 

As tax pros we get enough agita dealing with the IRS, the states, and good clients.  More agita we don’t need.

JS is more lenient than I am – he gives these cafones “two chances to prove that I should keep them as clients”.  At this point in my career, especially as I am trying to “thin the herd”, one strike and you are out.

+ In “Spousal IRAs Retitled” JK LASSER tells us that “In honor of a former U.S. senator, the spousal IRA has been renamed the Kay Bailey Hutchison Spousal IRA.”  Like the Keogh Plan, the Roth IRA, the Coverdell Education Savings Account, and the Pease in PEP and Pease.

I am not familiar with KBH, so I cannot properly comment on the appropriateness of the naming – but considering today’s Congress it seems the members deserve contempt more than they do “honor”.

Back in the late 80s (I believe) someone suggested that the government “sell” naming rights to bills and items created therein, like what is done with stadiums and concert venues.  For example the “Citibank Spousal IRA”.  At least that would generate some cash to reduce the deficit. 

+ Once again Jason Dinesen asks “What’s the Upside of Preparer Regulation for Enrolled Agents?” in light of “recent NAEA talking points were regarding tax preparer regulation at a legislative day NAEA held in Washington, D.C. in May.”

As usual, Jason makes good points.  And he again correctly points out that most of the taxpayer public has no idea, or the wrong idea, what an EA is. 

I believe my proposal for incorporating the RTRP designation, with a more difficult competency test (and a grandfathering exemption from the test for proven experienced tax pros), into a 2-part voluntary certification program with the Enrolled Agent credential would appropriately deal with his issues.  See my TAXPRO TODAY editorial “What the IRS Should Do About the RTRP”.

+ I have not attended an IRS Nationwide Tax Forum since the east coast location was changed from New York City to National Harbor (near Wash DC).  They are a good source of CPE, although the individual seminars are limited (at least when I attended) to 50 minutes, which also limits the coverage of a topic or ability for Q+A.  The seminar rooms were always crowded, and it was often difficult to take notes as there were no tables at which to sit. 

The main benefit of the Forum is the IRS speakers – hearing the Service’s point of view on tax topics.  It also has a good Exhibition Hall.


I asked Kay, via “tweet”, “Did Werfel address the RTRP issue?”  Her response was “no he didn't ...”.  Odd, considering he was addressing tax professionals.  Kay told me the RTRP program was not discussed anywhere at the Forum.

+ Speaking of the IRS - in case you haven’t heard, the WASHINGTON POST announced “Obama Nominating Restructuring Expert to Lead IRS Amid Political Controversy” -

President Barack Obama has chosen a retired corporate and government official with experience managing numerous organizations in crisis to take over an Internal Revenue Service under fire for targeting political groups.

Obama said his nominee for commissioner of the tax agency, John Koskinen, ‘is an expert at turning around institutions in need of reform’.”


+ The NATP’s weekly email newsletter advised members that the IRS has released the 2013 draft Form 4684, Casualties and Thefts, and the accompanying instructions. The draft form includes a new Section C, Theft Loss Deduction for Ponzi-Type Investment Scheme Using the Procedures in Revenue Procedure 2009-20. This revenue procedure provides an optional safe harbor treatment for taxpayers who experienced losses in certain investment arrangements discovered to be criminally fraudulent. It also describes how the IRS will treat a deduction for such a loss if the safe harbor treatment is not elected.

I have had one client who was a victim of a non-Madoff Ponzi-like scheme a few years back.

+ FYI, NFIB (National Federation of Independent Business) has an online “Healthcare Resource Center” with lots of information on the Patient Protection and Affordable Care Act (PPACA).

+ And another FYI – I was recently emailed for review “7 Career Options for the Aspiring Accountant”, an “infographic” you might find interesting “on career possibilities for the aspiring accountant. It highlights the various job opportunities that are available for those entering the accounting workforce. Additionally, it provides a closer look into average salaries, qualifications, job growth and other key facts and figures.”

RDF

Monday, July 29, 2013

TAXPRO BUZZ


Sorry to be late in getting this post “up”.  I was hoping for more “stuff” to include.  If you have come across any BUZZ you want to share with fellow tax pros let me know.


+ William Perez provides “IRS Update for July 26, 2013”, which lists “pages or files residing on IRS.gov that are new or updated from July 19 to July 25, 2013”.

William will be posting such an update every Friday.

+ The IRS’s mandatory RTRP program may be dead (hopefully for good), but the PTIN program continues.  ACCOUNTING TODAY reports “IRS Sends Warning Letters to Preparers With Old PTINs”.
 
The following statement still applies -

As of Jan. 1, 2011, anyone who, for compensation, prepares or helps prepare all or substantially all of any federal return or claim for refund must have a valid PTIN and use that PTIN as the identifying number on returns, the IRS noted. All PTINs must be renewed annually.”

And -

The IRS also said it is continuing efforts to identify paid preparers entering no identifying number on returns that they prepared.”

+ An email from NATP introduced me to the product described below.  Perhaps it is something you should consider purchasing.  I have not ordered or seen this book but am considering a purchase to supplement the many forms, schedules and worksheets I have developed for external and internal use in my 1040 practice (click here). 

FYI - there is a special discounted price of $75.00 for NATP members.  If you are not already a member, email me at rdftaxpro@yahoo.com (with “NATP Membership” in the subject line) to receive membership information. 

NATP Tax Store - Audit Proof the Tax Office - #3298

It’s becoming harder and harder to protect ourselves from ourselves. Tax professionals are under the IRS microscope and are being audited. Thousands of offices are being targeted each year.

In this manual, you will find the forms and instructions you need to audit proof your office. In addition to the paper forms, you will also receive a flash drive with over 35 forms including many PDF fill-in forms.

Price - $89. To place your order go to the Tax Store or give us a call at 800.558.3402.”

RDF

Friday, July 26, 2013

THE NEW JERSEY ELECTRONIC FILING MANDATE


This post is for NJ tax pros.  I will outline my NJ-1040 submission practice – and ask that you let me know if you think I am following the law.

Under the NJ “Electronic Filing Mandate” preparers that reasonably expect to prepare 11 or more individual gross income tax resident returns (including those filed for trusts and estates) during the tax year must use electronic methods to file those returns for which an electronic filing option is available.

I do not use flawed and expensive tax preparation software to prepare my federal and state 1040s – and at this point in my career I never will.  Therefore the only electronic filing option available to me for NJ returns is NJWebFile.

Because of the many, in my opinion unnecessary, restrictions and limitations to the NJWebFile system I cannot submit all of my NJ-1040s using this method – even if I wanted to.  For these returns, and in my case, there is no electronic filing option available.  I do not, in my opinion, need a client-signed OPT-OUT form for those returns I cannot submit electronically because NJWebFile will not allow me to do so.

Whenever possible I submit my NJ-1040s “electronically” via NJWebFile, unless the client specifically “opts out” of electronic filing.  In such a case I get a signed OPT-OUT form from the client.

It is beneficial for a client whose NJ-1040 requests a refund to submit their return via NJWebFile because doing this allows their refund to be directly deposited to their bank account.  Despite the fact that direct deposit would save the state money, NJ does not allow direct deposit for refunds requested on returns that are not, or cannot be, submitted electronically.

So what do you think?

FYI, New York State specifically exempts me from the NY electronic filing mandate because I do not use flawed and expensive tax preparation software.  They still, however, extort $100 from me each year for the “privilege” of preparing a little over 20 NY state income tax returns.

RDF  

Wednesday, July 24, 2013

RAMBLINGS ON TAX PRACTICE


In looking back at my 40+ years in the business, if I were to start all over again I think I would limit my practice to 1040s.  Period.  No 1065s.  No 1120s.  No 1041s.  Just 1040s.

I would probably have to, as I have done, also provide year-round bookkeeping and accounting services for additional income.  But I would not accept any clients that collected and remitted state and local sales tax, or any other kind of tax, and I would limit my involvement to keeping the books and preparing payroll and payroll tax returns and reports, but I would not prepare the corporate income tax returns.

If possible I think I would also try to avoid bookkeeping, accounting, and payroll.

Why?  To limit my need to keep up-to-date to 1040 issues only, and to limit my exposure to agita and liability for FUs. 

My ideal practice – for me personally – would be preparing 1040s from February to April, and writing, relaxing, and “wandering” for the rest of the year.  Hopefully the writing would provide additional income so there would be no need to take up bookkeeping, accounting, and payroll.  Other tax preparers could substitute teaching CPE for writing, or do both.  As for me, I am not a confident or experienced public speaker - so I would limit my activity to writing, which I enjoy and am good at.

Actually I enjoy bookkeeping and payroll, and always have.  But I do acknowledge the potential for agita and liability.    

Today I do not accept any more new 1040 clients, and do not accept any non-1040 clients.  But I do have some existing business clients that I really cannot “drop” due to long-time, and often personal, relationships.  So I still do prepare quarterly sales tax returns and 1120s.  I have been able to lose preparation of multiple 1120s for a business client due to a merger.  I will continue to do the year-round bookkeeping and payroll for a couple of more years, but have handed off the 1120 preparation.

When I say limit my practice to 1040s I mean just that.  One of the problems of business clients is that they come to me to prepare various non-tax related government forms, reports, and questionnaires – like business census forms and municipal rental real estate reports.  These forms all usually have a financial aspect – and I do not object to providing specific financial information available to me – but they also involve other information about which I have no personal knowledge and no interest to learn about.

This happens with 1040 clients, too.  I am often given census forms, student loan applications, property tax reimbursement applications, loan applications, utility discount applications, and the list goes on.  However I specifically state to clients in writing that I do not, and will not, prepare these forms, reports and applications.  The most I can do, I tell clients, is provide specific financial information from the completed tax return needed to answer specific questions.     
 
Here is what I tell my clients (in writing) -

"I prepare income tax returns.  I do not prepare mortgage or loan applications, census forms, college financial aid applications, prescription drug or utility discount program applications, Property Tax Reimbursement applications, or any other such forms.  Please do not ask me to fill out these forms!  I have no special experience, knowledge or expertise with any of these forms - I do not know any more about them than you do.  The most I can do is provide you with any needed income information from your tax return."
 
All these non-tax forms, for both business and individual clients, are truly a PITA.  I have no knowledge or expertise in preparing these forms and applications.  And I do not want any knowledge or expertise in preparing these forms and applications.  In the past when I have given in and filled out such forms I have merely read the instructions and followed them as best I could – the same as the client could do himself/herself.  But most of all – I just do not want to be bothered with these forms.

There are preparers out there who do solicit such forms, especially college financial aid applications, as a post-tax season sideline source of income, and do acquire knowledge and expertise in these forms.  That is fine.  It is just not for me.

So preparers who are just starting out in “the business” – maybe you want to think about limiting your business to 1040 preparation. 

What do my fellow experienced tax pros think?

PS – thanks for allowing me to “ramble”.

RDF

Monday, July 22, 2013

TAXPRO BUZZ


+ Kathryn M. Morgan, EA offers a “Step-by-Step Guide to Preparing a Return for a Disabled Veteran at PARKER PUBLISHING.

+ CPA Robert Gard covers “Nine Factors That Determine Whether an Activity Is a Hobby” at the AICPA’s THE TAX ADVISOR.

+ “Tax Pros: Still Trying to Figure Out Which Social Network is Right for You?  INTAXICATION (Tax Buzz with a Twist) provides an “infographic” that “provides some great metrics on each of the social networking sites along with some thoughts on best use and drawbacks of each”.

I am a “twit”, but you will never catch me on Spacebook or My Face.  If I want to share pictures with friends and family I will send them an email.  And if I want to provide information on my business to solicit clients I will create a website for my practice.

I would be interested in hearing from tax pros about what you can do on Spacebook or My Face that you cannot do just as well on your business website.

+ EAs Jason Dinesen (DINESEN TAX TIMES) and Russ Fox (TAXABLE TALK) both discuss the “Patient-Centered Outcomes Trust Fund Fee” nonsense – and explain why it is truly the most ridiculous tax ever (and there have been a lot of ridiculous taxes over the years) and an exercise in bureaucratic futility.

+ Here is a webinar you may be interested in “attending” – “What the New Healthcare Law Means for Your Small Business”.  I learned of it via a “tweet” from @ManasaSogNadig.

RDF

Monday, July 15, 2013

TAXPRO BUZZ


You are welcome to submit posts and other online resources for inclusion in future installments.  Email me at rdftaxpro@yahoo.com with “TAXPRO BUZZ” in the “subject line”.

+ PARKER PUBLISHING gives us a primer on “Tax Research Methodology”.   

+ Wonder “Where RTRPs Stand After Loving”?  ACCOUNTING TODAY addresses the question.  It does a good job of outlining the story so far – and where the fakawi.

+ TAXPRO TODAY deals with the issue of “Charging for Off-Season Work”.

+ TAX MAVEN Diane Gilabert lists “10 Section 1031 Exchange Facts You Need to Know”.

It’s been decades since I did a return with a Section 1031 exchange.  Hopefully I will never have to do one again before I retire.

+ And Diana also discusses “Material Participation: Are You Talking to Your Clients?” –

Taxpayers are losing material participation cases at an astonishing pace. The IRS is emboldened by these wins, and is aggressively auditing material participation claims.”

Diana’s blog is apparently written for tax professionals.  You may want to “subscribe”.  When you do you will receive a free “white paper” on “10 Common Errors Tax Practitioners Can Avoid”.

+ Jason Dinesen reminds us “Have an HRA? Make Sure to Pay Your “Patient-Centered Outcomes Trust Fund Fee”.    

If you, like me, reacted to the title with a “WTF?” check out the post.  FYI – it has to do with “Obamacare”.

+ And speaking of “Obamacare”, TAX MAMA Eva Rosenberg provides “A Tax Guide to Obamacare: What taxpayers and tax professionals need to know about the health law”.

RDF

Tuesday, July 9, 2013

WHAT DO YOU THINK?


While doing research for a book I recently came across “The History of Enrolled Agents(E.A.)” from Robert Normandie EA & Associates.  Included at the end of the piece, which discusses the evolution of today’s Enrolled Agent designation, is “an interesting note concerning the E.A. exam”.  RN and Associates tell us (are mine) -

The exam was originally written by American Society of CPA's.  It has become a controversy into itself. The controversy is its failure rate. Many critics think that the test was stacked so that very few would pass it regardless of their background. They are quick to point out that most CPA's would fail the test, lacking the necessary tax knowledge. When you look at the logic behind that, it may make sense. Eliminate the completion from the beginning. Some critics go as far to say they think there was collusion between the IRS and the CPA. IRS Agents, after a period of time in service are exempt from taking the test. Again the competition is eliminated. Regardless of whom you believe, the IRS is committed to make change, to make it more fair for all who take it.

I am not a conspiracy theorist, and I do not buy the IRS working in cahoots with the AICPA.

But did the AICPA, on its own, write the Special Enrollment Examination so that it would be too difficult, and seriously limit the number of eventual Enrolled Agents, true qualified and recognized 1040 experts, to be available to compete with CPAs for tax preparation business – an area that in the opinion of the AICPA, “the public already believes CPAs to own" (click here and read the 4th "starred" item).  It certainly would not surprise me if the AICPA did.
 
And I would also certainly not surprise me if the AICPA was behind the various state laws that “prohibit Enrolled Agents from using their credential when representing taxpayers or advertising for potential clients”, which the recently introduced “Enrolled Agents Credential Act” (HR 2313) hopes to do away with. (see “Bill Would Let EAs Promote Themselves Everywhere").

Can anyone confirm that the AICPA did indeed write the SEE?

RDF

Monday, July 8, 2013

TAXPRO BUZZ RETURNS!


I will attempt to bring back TAXPRO BUZZ on a weekly basis.  Let’s see how long I can keep it up.

You are welcome to submit posts and other online resources for inclusion in future installments.  Email me at rdftaxpro@yahoo.com with “TAXPRO BUZZ” in the “subject line”.

+ NJ tax preparers should read my post “The DFBs!” at THE WANDERING TAX PRO.  This post concerns late refunds for manually, but timely, filed NJ-1040s.

The post ends with the question -

Have any of the NJ tax pros reading this also experienced excessive delays in the issuance of client paper refund checks?

+ CCH has published a new Tax Briefing titled “Supreme Court Strikes Down DOMA” that examines the impact of the DOMA ruling.

+ And PARKER PUBLISHING provides tax pros with a “Complimentary Client Letter: The Tax Implications of DOMA”.

+ BLOOMBERG.COM reports that “Health-Law Employer Mandate Delayed by U.S. Until 2015”.
 
+ speaking OF "Obamacare", The firm of Drucker and Scacetti, author of the TAX WARRIER CHRONICLES blog, has created two “quick reference charts” for the provisions of the Patient Protection and Affordable Care Act.  One for businesses and one for individuals.

+ CPA Jim Buttonow gives us a good primer on “Using the First-Time Penalty Abatement Waiver” at AICPA’s THE TAX ADVISOR.

+ TAX MAVEN Diane Gilabert answers the question “I Found An Error – What is My Professional Responsbility? 

RDF

Tuesday, June 25, 2013

MY FINAL WORD ON CPA VS EA OR RTRP


The process of becoming a Certified Public Accountant (CPA) is a difficult one.  While the specific requirements vary slightly from state to state, in general in order to become a CPA one must meet an education requirement (have a bachelor’s degree with a minimum number of credits in accounting subjects) and an experience requirement (“apprentice” with a CPA firm), must pass a difficult 4-part exam (Taxation and Business Law, Audit, Business Concept and Environment, and Financial Accounting and Reporting), and must maintain a minimum number of hours of continuing professional education (CPE) each year.  A person who receives the designation CPA has certainly accomplished a difficult feat and should be congratulated.

Being granted the designation CPA allows one to certify financial statements.  CPAs are also permitted to “practice” (represent taxpayers) before the Internal Revenue Service.   

The CPA exam is a test of one’s ability to prepare, audit, and certify financial statements.  I have recently been told by a CPA candidate that 20% of the questions on one of the four parts of the exam deal with “individual income taxes”.  So 5% (20% x 25%) of the CPA exam deals with 1040 issues.  Passing the CPA exam does not provide any material indication of one’s ability to prepare 1040s.

A CPA must take up to 40 hours of CPE each year.  None of the 40 hours must be in federal individual income tax topics (“No specific subject areas are required”).  Merely having the initials CPA after one’s name is no indication that the person remains current in 1040 taxation.  

A CPA is not automatically a 1040 expert.  Having the initials CPA after one’s name by itself is absolutely no indication that the person is competent or current in 1040 preparation.

The Enrolled Agent (EA) Special Enrollment Examination is a 3-part (Individual, Business, and Representation, Practice and Procedures) test of one’s ability to prepare federal income tax returns and one’s ability to represent taxpayers before proceedings of the Internal Revenue Service.  The Registered Tax Return Preparer competency exam was a test of one’s ability to prepare federal individual income tax returns (“the completion of Form 1040 series returns including basic related schedules and forms”).  Passing either the Special Enrollment Examination or the RTRP competency test does provide an indication of one’s ability to prepare 1040s.

An EA must take 72 hours of CPE every 3 years, with an annual minimum of 16 hours, in federal taxation or federal tax related matters, such as accounting, tax preparation software or ethics.  An RTRP was required to take 15 hours of CPE each year, which include 2 hours of ethics, 3 hours of federal tax law updates, and 10 hours of other federal tax law.  Having the initials EA or (for now) RTRP after one’s name is a clear indication that the person remains current in 1040 taxation. 

Many CPAs are trained and experienced, and extremely competent and current in 1040 preparation.  But it has absolutely nothing to do with the initials CPA.  It is because of the specific education, training, and experience of the individual.  A CPA is not automatically a 1040 expert, but a specific CPA may be a 1040 expert.

If a CPA were able to earn the designation of RTRP it would clearly identify that individual CPA as being competent and current in 1040 preparation.

And BTW, surveys have proven that the fees for preparation of series 1040 tax returns charged by CPAs are much higher than the fees charged by EAs and “previously unenrolled” preparers.

‘Nuff said. 

TAFN

Monday, June 24, 2013

CONTINUING A DISCUSSION ON THE CURRENTLY DEAD IRS RTRP PROGRAM


ACCOUNTING TODAY recently published my editorial “What the IRS Should Do About the RTRP”.
 
I had hoped to begin a serious discussion among professionals on my proposal for a voluntary IRS-sponsored RTRP program.  While some intelligent and “on topic” comments were submitted, unfortunately the discussion in the comments section soon got out of control, devolving into a totally unrelated “mucking fess”.  I must accept some of the blame for this “devolution”, as I, myself, mistakenly went off on a tangent in a couple of my early comment responses.
 
I would like to use this post to address some of the intelligent “on topic” comments that were submitted.
 
·  I agree that, going forward, the Internal Revenue Service should not be permitted to charge tax preparers a fee for renewing their PTIN.
 
And now that there are no requirements for maintaining one’s PTIN there should be no more annual renewal.  Perhaps the PTIN should be renewed every 3 or 5 years, with no fee, so that those who have retired, no longer prepare 1040s for compensation, or have gone to their final audit can be removed from the registry.    
 
I originally obtained my PTIN years before the institution of the Service’s mandatory RTRP regulation regime.  It was originally offered to tax preparers as an alternative to using their Social Security number as identification when signing tax returns.  I paid no fee for applying for my PTIN, and I was not required to apply for renewal annually.
 
The Internal Revenue Service does not charge for applying for an Employer Identification Number (EIN) or an Individual Taxpayer Identification Number (ITIN), and the Social Security Administration does not charge for applying for a Social Security Number.
 
If the IRS continues the RTRP designation as a voluntary program the costs of this program should be covered by an appropriate RTRP application and renewal fee.  The PTIN application and renewal should not be used to raise funds for the voluntary RTRP program.
 
As for the fee collected by the IRS for PTIN applications and renewals for 2011 through 2013, while at the time the fee may have been appropriate, since the purpose of the fee was to fund the mandatory RTRP regulation regime, and that regime no longer exists, once the Court has upheld the decision in Loving v IRS tax preparers who paid this fee should be able to apply for and receive a refund.
 
If the IRS decides not to continue the RTRP designation as a voluntary program, whether in conjunction with its EA designation or not, I believe that those who were forced to pay for taking the competency exam under the regulation regime should also be able to apply for and receive a refund of the exam fee.
 
· While I support the contention of the plaintiffs in Loving v IRS that the Internal Revenue Service does not have the authority to institute a mandatory regulation regime for all tax return preparers, and support the decision in Loving v IRS, I do not agree that the cost of mandatory CPE for tax return preparers is “prohibitive”.
 
It has always been my belief that if a serious tax return preparer does not already take at least 15 hours of continuing professional education in federal income tax topics, including 1040 updates, each year he/she certainly should be.  It is vital for serious tax preparers to keep up-to-date on the changes to the US Tax Code, Tax Court decisions, and IRS rules and regulations – and verifiable CPE is the only way to confirm that this is being done.
 
Any voluntary certification program for tax return preparers must include mandatory annual CPE.
 
My only objection to mandatory annual CPE involves the requirement to sit through 2 hours of ethics preaching each and every year.
 
I have said time and again - If I am a crooked tax preparer sitting through 2 hours of ethics preaching ain’t going to turn me honest!
 
At most a voluntary designation program should require perhaps 2 hours in the first year a person receives the RTRP, or whatever designation, and 1 hour of updates every two or three years thereafter. 
 
I have found that, because of the 2-hour annual ethics preaching requirement for EAs, CPAs, and other financial professionals, and for a while RTRPs, almost every 1 or 2-day seminar or workshop, regardless of the main purpose or topic(s) of the event, includes 2-hours of ethics.  I have been told by some education providers that they must include the 2-hours of ethics in the program in order to maintain a profitable level of attendance.  So, as is true in my case, a tax pro is often forced to pay for and sit through 4 or even 6 hours of ethics preaching in a year – a waste of time and money! 
 
If there is any “required” expense of a tax preparation practice that could be called “prohibitive” it is the cost of the initial purchase and annual updates of tax preparation software.  In order to comply with the electronic filing mandate all paid tax preparers must purchase flawed and expensive tax preparation software to be able to electronically file 1040s, unless the preparer can get all of his/her clients to “opt out”, as I do.
 
The electronic filing mandate for paid tax preparers should be limited to those who use tax preparation software, as is the case, surprisingly, with New York state tax returns.
 
And, to reprint one of my more appropriate comment responses from ACCOUNTING TODAY -
 
·      I agree that if there must be a "mandatory" regulation of all tax return preparers, which I do not believe there should be, the Internal Revenue Service should certainly not be the agency to administer this regulation. This is one reason the Court was correct in shutting down the RTRP regulation regime.
 
However, I do believe that the IRS can offer a "voluntary" secondary tax professional designation in conjunction with the current Enrolled Agent designation in the manner I have discussed in my editorial.
 
Along these lines, I do not believe the IRS should have to approve individual CPE providers in order for their individual education programs be accepted as satisfying the CPE requirement, as had been the case in its RTRP regulation regime. The current method for accreditation of CPE providers is sufficient.
 
I still believe that the absolute best option for administering either a mandatory or voluntary certification program is an independent industry-based organization.
 
·      I do not mean to imply that the RTRP competency test was a "walk in the park". It obviously required study and preparation and knowledge of the Tax Code. However, because passing the test was required of all "previously unenrolled" tax preparers it had to be basic and general enough for all serious and experienced tax preparers to be able to pass it in one or two tries.
 
The Enrolled Agent "Special Enrollment Examination" is certainly substantially more difficult and comprehensive than the RTRP competency test. Its purpose is to certify a higher level of tax knowledge and competence and not to prevent individuals who do not pass from preparing 1040s. If the voluntary RTRP designation is to be part of a two-tiered program partnered with the EA designation the required examination must be more demanding to maintain the integrity of the EA component.
 
Perhaps the current Special Enrollment Examination could be divided in two, with each half enhanced. The RTRP portion would deal with 1040 preparation issues and the EA portion would deal with more advanced preparation issues, and perhaps entity taxation, and representation issues.
 
So let the discussion continue.  What do you think about what I have said in this post? 
 
At least in this “venue” I can moderate the comments!
 
TAFN