I COULDN’T LEAVE WITHOUT POSTING THIS

I know I said I was “gone” for the tax season, but it is still slow, and I felt this recent development needed commenting in light of my editorial “It’s Time for Independent Certification for Tax Preparers” (like many of the items I write for portals, the title is written by the editor – my original title was “Do we really need to license or regulate tax return preparers”) at ACCOUNTING TODAY.

The National Association of Tax Professionals (NATP) and other tax-related membership organizations (NSA and NAEA) have been good at providing members with updates and information on the continuing Loving vs IRS “story”.  Here is what the NATP sent members via email on Saturday (highlight is mine) -

“On February 1, 2013, United States District Court Judge Boasberg issued a Memorandum and Opinion Order. In this order he clarified two points:

1.    Defendants’ {IRS – rdf} Motion to Suspend Injunction Pending Appeal is DENIED; and

2.    The Injunction is MODIFIED to make clear that the IRS is not required to suspend its PTIN program, nor is it required to shut down all of its testing and continuing-education centers; instead, they may remain, but no tax-return preparer may be required to pay testing or continuing-education fees or to complete any testing or continuing education unless and until this injunction is stayed or vacated by the Court of Appeals.”

The court did not stay the injunction.  The mandatory RTRP program is dead.

The PTIN requirement, which is really all the IRS needed in the first place, is intact.  All individuals who want to prepare federal tax returns for compensation must register with the IRS and be issued a PTIN.  But “non-exempt” (what I call “previously unenrolled”) preparers are not required to take a competency test to receive the designation of RTRP and maintain required annual CPE in order to renew their PTIN.

The court suggested that the IRS can continue its RTRP designation program, with required testing and CPE, on a voluntary basis, similar to its Enrolled Agent (EA) program.  PTIN-holders may choose to receive the certification/designation of Registered Tax Return Preparer by meeting the requirements, just as they have been able to choose to be certified/designated as an Enrolled Agent.  This way the money spent by the IRS in developing the program would not be lost, and those who have already received the RTRP designation will not have wasted their time and money.

An IRS-maintained RTRP voluntary certification program would negate, and make academic, the need for the National Institute of Certified Tax Return Preparers that I proposed in my editorial.  While I still contend the best source of administration of such a voluntary certification program would be an independent industry-based organization, I could live with the IRS running the program – as long as it was voluntary.

Three things:

First -

The original need for a $64.50 initial and $63.00 subsequent annual PTIN registration fee was to fund the annual renewal process that would include verification of required CPE and maintaining a system to independently track CPE.  Since PTIN-holders no longer need to maintain CPE as a requirement for renewal there is no longer a need for such a fee.  The Service could charge a more nominal fee, no more than $25.00, to cover the basic costs of maintaining the PTIN registry.  Prior to the initiation of the regulation regime, when PTINs were voluntary as an alternative to having to use one’s Social Security number, there was no charge for applying for a PTIN, and there was no need for annual renewal.  With the RTRP requirement gone, the PTIN would not need to be renewed annually – perhaps renewal could be every three years so the registry would remain relatively current.

The $64.25 initial and $63.00 annual fee would apply to only those who apply for the voluntary RTRP status.  The IRS, while continuing the annual 15 hour CPE requirement, could also maintain a 3-year renewal period similar to that currently in affect for EAs, so the $63.00 renewal fee would not be annual.

Technically, PTIN-holders who did not go on to earn the RTRP designation should be entitled to a refund of the difference between the new nominal registration fee and the amounts they had paid.  

Second -

We still have the problem of naming the voluntary certification designation.  The term “Registered” Tax Return Preparer is really no longer appropriate.  Since all paid tax preparers are still required to “register” with the IRS, all PTIN-holders are, in effect, “registered” tax return preparers.

Ideally the IRS could make the designations of “?TRP” and “EA” similar to identify that they are different levels of the same program.  Originally I had suggested ETRP (Enrolled Tax Return Preparer) as the new designation for current Enrolled Agents.  This designation keeps the historical “Enrolled” component, but properly identifies the holder as a Tax Return Preparer and not an “Agent” of the IRS.  This is still a valid option.

The term “certified” will always cause problems, and would appear to be a step higher than “enrolled” when it is actually just the opposite (ETRP is a step higher than RTRP).  And “licensed” does not apply because a license is not required to prepare tax returns, and this would appear that those preparers who choose not to apply for the new voluntary designation are not really “kosher”.  Perhaps “Regulated Tax Return Preparer”, though I do not really like the sound of that.  Or maybe “Accredited Tax Return Preparer”.

I expect that if the IRS does indeed decide to keep its RTRP program as a voluntary certification it will keep the term “Registered Tax Return Preparer”, however inaccurate, only because keeping it in place would be cheaper than having to rewrite its programs for a new name.  Whatever it does I would still recommend that the EA designation be changed to ETRP.

The IRS could combine the new voluntary RTRP (or whatever) program and the existing EA program into a two-tiered certification program.  A preparer would first apply for and be granted the RTRP designation by way of a test that is limited to tax preparation (perhaps more involved than the current basic open-book basic test).  After a year or two that person can then take a second test, with added emphasis on taxpayer representation issues and other advanced topics, to become an ETRP.  The ETRP designation would replace the RTRP (or whatever) designation.  One would not be both an RTRP and ETRP – but either an RTRP or an EtRP.   

And third –

When the RTRP designation was mandatory the IRS exempted CPAs and attorneys from the requirement.  This is because, as David Williams originally explained to me, the Service felt it was “statutorily prohibited” from regulating CPAs and attorneys ability to “practice” before the IRS (this was when the Service confused preparation with practice).

Just as with my proposal for a NICTRP, under the new voluntary RTRP (or whatever) program CPAs and attorneys who prepare tax returns could elect to apply for this new designation to properly identify their competence and currency in 1040 preparation.  A person could be both a CPA and an RTRP (or whatever).  Currently there are CPAs who are also EAs.  And, as with CPAs who choose to become EAs, CPAs and attorneys who apply for this designation would be required to take the competency test and maintain CPE in federal taxation.

OK, now back to my 1040s.  But before I go – what do you think about my three points?

RDF