Thursday, January 24, 2013


In light of current developments I have decided to publish in detail my opinions on the subject of tax return preparer regulation, licensure, and/or certification.

Since the beginning of the IRS inquiry I have supported the concept of “licensing” tax return preparers. 

Prior to the IRS attempt at regulation, any cafone could hang out a shingle as a “professional tax preparer”. A person with no knowledge or experience could simply purchase a tax preparation software package and offer themselves up to the public as a tax expert.  There was no standard to assure that a person who calls himself/herself a “tax preparer” actually knows his arse from a hole in the ground when it comes to the Tax Code.

One morning, several years ago, while walking on the main commercial street of my section of Jersey City I saw a sign in the window of a barber shop that read “tax returns prepared here”. You could apparently get a haircut and a manicure and have your 1040 prepared all in one sitting! Many years ago, before I had my own office, I had considered renting a desk in an insurance or real estate office.  iI never occurred to me to rent a chair at a barbershop.

Early in my career, when I was working with my mentor Jim Gill at Journal Square (where the “Jersey Bounce” started), I came across a near-vacant room in the corner of the old bus station with large storefront windows. Inside the room was a person sitting on a folding chair at a card table with an adding machine – there was no other furniture or fixtures in the room. A hand-printed cardboard sign in the window advertised “Tax Returns Prepared Here”. What was sad was that I once actually saw a person in the room getting his return prepared.

I believe that an RTRP designation, or some similar designation, whether required or voluntary, would put the competent, experienced, and ethical previously “unenrolled” preparer, like me, on an equal footing with the CPA in the eyes of the general public. It would dispel the unfounded “urban tax myth” that a CPA is a tax expert.  CPAs would no longer erroneously “own” the tax preparation business, as the AICPA told a member it believed they did.  The mere possession of the intials CPA does not in any way, shape or form indicate that the possessor has any knowledge of the Tax Code or any experience in preparing 1040s.  

My objections to the final IRS regulations for the program have been twofold –

(1)  All individuals who wish to prepare 1040s for compensation should be subject the same requirements.  CPAs, attorneys, and “supervised employees” should not be exempt from either any testing requirement or the annual CPE in federal taxation requirement (EAs have already been tested and already maintain CPE in federal taxation).

(2)  There should be a “grandfathering” exemption from the competency test for long-time experienced preparers who have proven that they remain current by having taken the currently required amount of CPE during a multi-year “look-back” period.

I do not feel that tax preparers MUST be regulated, but I do not object to proper regulation.  If the IRS did not initiate its program I would not be calling for regulation.  Now that the court has shot down the current IRS program I will not be calling for its reinstatement, but will not fight against any eventual reinstatement. 

To be honest, licensure or regulation, even as was in effect under the IRS RTRP program, would not affect my individual practice one bit.  I would continue to operate my 1040 practice in the same way under regulation as I did prior to regulation.

I have had a PTIN since 1999, as an alternative to having to enter my Social Security number as preparer on tax returns I prepare and sign.  For at least the past 25 years I have maintained an average of perhaps 24 hours of CPE in federal taxation, as well as state tax CPE, each and every year.  While I do not want to be forced to take the RTRP competency test, having to do so would not force me to abandon my practice.

You don’t get any more “mom and pop” than my practice.  I have no employees, and never have.  I do not have an office open to the public.  For the past 10 years or so I have been working out of my home, occasionally visiting clients’ homes to pick up their tax information.  To say the requirements of the IRS regime, especially the CPE requirements, were “onerous” and “prohibitive” is ridiculous.  They would certainly not force this “pop” (no mom) out of business.

I firmly believe that ongoing continuing professional education is a MUST to remain in business as a tax professional.  I have always said that any serious tax preparer who is not already maintaining the equivalent of at least 15 hours of continuing education each year should be.  The cost of obtaining and verifying such continuing education is a basic “ordinary and necessary” (and I do mean necessary) cost of being a tax preparer.

I prefer to attend live CPE classes as a major component of my continuing education.  But I also continually “self-study”.  My annual continuing education “budget” is not large, and I know that there are much less expensive, and even free, alternatives to live seminars and workshops.

I do believe that requiring all CPE providers to be individually approved by the IRS is going too far and should not be part of any regulation, licensure, or certification program.

As a point of information, I was “self-taught” in the “art and science” of tax return preparation decades ago by way of actually preparing tax returns, initially using prior returns as a guide, under the guidance and supervision of an experienced tax professional.      

CPA Joe Kristan, a vocal opponent to IRS regulation of tax preparers, believes that the IRS regulation regime would force many “casual preparers” out of business.  I will admit that he may be correct to a degree – but I also believe that this is not necessarily a bad thing.

There are a good number of individuals out there who prepare 1040s for friends, coworkers, neighbors, and referrals therefrom for a fee, based merely on their experience preparing their own returns over the years and from reading the new IRS Pub 17 or 1040 instruction book and/or other sources.  These individuals may be sincere and feel they are providing a service to their “clients”.  Yet they may not be, and very probably are not, providing the best service to these clients.  I would consider these individuals “casual preparers”.

I am constantly hearing nonsense from my clients that they have attributed to such “casual preparers”.  If such “casual preparers” are forced out of business because of the RTRP requirements this is good for the taxpayer public and the tax preparation industry and the Internal Revenue Service.     

As I have asked in response to Joe’s assertion, would you want a “casual” electrician wiring your kitchen, or a “casual” dentist filling a cavity, or a “casual” architect designing your home?

Joe also believes that the government regulation of tax return preparers would not substantially reduce tax fraud.  Here I agree completely with Joe.  But that is not the main reason for such a regulation, licensure, or certification program

While I agree that having the Internal Revenue Service regulate tax preparers is not the best option – it is without a doubt a far superior option to having Congress legislate regulation.  My opinion of the intelligence, competence, and ability, or rather lack of intelligence, competence, and ability, of the current members of Congress is well known.

The optimal source of tax preparer regulation/licensure/certification, whether mandatory or voluntary, would be an independent industry-based organization, not unlike the AICPA or ABA, such as the National Institute of Registered Tax Return Preparers that I have proposed.

So there you have it – my opinions on the subject of tax return preparer regulation, licensure, and/or certification.

So where do we agree – and disagree?



  1. Congratulations on another definitive post,Robert.As always you seem to read my mind and eloquently put it into words.I agree completely that the IRS needs to let this issue be handled by NATP or NSTP. The only stipulation to make it just one certification.There does not need to be one from every group in the country.

  2. From what I understand about the IRS' motion to lift the court's injunction until the case can be appealed (from Institute of Justice website), one of the legs upon which IRS based its case involved the term "practice before the IRS." I, too, am a sole accounting practitioner for over forty years, and before that was a staff accountant at Touche Ross (now Deloitte & Touche) for eight years. Nearly all of my clients have been with me for 20 to 40 years, and I have a stellar record with them AND IRS.

    IRS has recently begun applying the concept of "practice" to include on a limited basis people like myself, an interpretation contrary to what I always knew. I have never been able to "practice before IRS" (as it has always been understood to be for years). IRS was able to "fuzz up" this designation in order to implement the 2011 requirements to restrict unenrolled return preparers.

    I'm sorry, but I do not see IRS efforts as improving quality control but rather as a power grab. I certainly agree about CPAs and lawyers not necessarily being qualified to do tax returns. In that sense the regulations are discriminatory.

    I appreciate coming across this website and thank you for your articles.

  3. You say, "While I agree that having the Internal Revenue Service regulate tax preparers is not the best option – it is without a doubt a far superior option to having Congress legislate regulation."

    In rereading your essay I have to add this perspective. The IRS is an agency of the administrative branch of government, and, as such, is not as reflective of the will of the people, although IRS did seek public input before enacting these regulations. Whereas, Congress, in spite of its poor performance, is still the legislative branch which is suppose to be representative of We the People. Traditionally it has been Congress that has dictated what IRS can and cannot do when it comes to regulatory power. IRS just got a little too big for its britches, imho.

    One other thing I've observed is that IRS would like for us independent return preparers to be considered more like a form of agent working for them, rather than the role of a contractor engaged by the public to perform a service of tax return preparation.

    My first loyalty is to the client and to use the tax law accurately to meet his needs within the scope of the law, of course. I have never taken any funny business from a client, nor would any other reputable preparer. It is sort of like a doctor treating a medical condition. His main priority is the patient, and he uses the moral and legal means necessary to the best of his ability. His main priority is not to the AMA.

  4. [quote]As I have asked in response to Joe’s assertion, would you want a “casual” electrician wiring your kitchen, or a “casual” dentist filling a cavity, or a “casual” architect designing your home?[/quote]

    There aren't 14 million people who do their own electrical work, dentistry, or home-architecting. And I don't know of anyone who ever died or even got physically injured from shoddy tax preparation. I'd put tax preparation more on par with the unregulated skill of bookkeeping than with the regulated skill of dentistry.

    Sure, these people using casual preparers aren't getting the *best* service, but they're probably saving quite a bit of money compared to having their return prepared by someone who is more than just a data-entry specialist. And if you want to insist on people using the *best*, then why stop at RTRP, and not just require all returns to be signed by an EA? I suppose most of those who can't afford it could get free help from VITA or AARP, but most VITA or AARP preparers aren't much more than data-entry specialists either.

    And I don't know for sure, but a quick search leads me to believe that neither VITA nor AARP do house calls. It is my understanding that the preparer regulation program would stop someone non-certified from charging money (or engaging in barter) to go to the house of an elderly or disabled individual and interview them while typing the answers into some downloaded free software (and even if they were certified, the free software won't let you put in a PTIN anyway).