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!