Cissy
06-27-2014, 01:11 PM
http://www.forbes.com/sites/kellyphillipserb/2014/06/27/irs-announces-new-tax-preparer-program-to-mixed-reactions/?partner=yahootix
There will be a tax preparer certification program after all. That was the word from Internal Revenue Service Commissioner John Koskinen.
If you’re scratching your head after Loving v. Commissioner and wondering how that’s possible, here’s your answer: the program will be voluntary. Following losses at the lower court and the appellate court which held that IRS did not have the authority to regulate preparers, the IRS dropped the matter. For the 2014 tax season, tax preparers were required to have a preparer tax identification number (PTIN) but were not required to engage in testing or continuing education requirements; similarly, the new Registered Tax Return Preparer (RTRP) designation was no longer relevant.
Nonetheless, the IRS was not to be deterred in its plan to regulate preparers. Despite objections from many in the industry, the IRS is now forging ahead with a voluntary program which will be in place by the 2015 tax season. That announcement was made on June 26, 2014, by Commissioner Koskinen via teleconference. He was joined on the call by Carol A. Campbell from the IRS Return Preparer Office (RPO).
Koskinen acknowledged that due to the complexity of the Tax Code, the majority of taxpayers use a paid tax preparer to assist with their taxes. Of those paid tax preparers, about 60% operate without regulation or oversight. The IRS found that “[a]lthough many of them do a good job, we have found that others are poorly equipped to assist taxpayers in preparing returns.”
To combat what the IRS perceives as a lack of oversight, they’re launching the Annual Filing Season Program. It is both voluntary and temporary. Commissioner Koskinen hopes that the “temporary” label doesn’t stick: he is hopeful that Congress will enact a proposal in the President’s Fiscal Year 2015 Budget that would give the IRS the authority for mandatory oversight of return preparers.
Referring to the voluntary program as “not the ideal solution,” the Commissioner explained the details of the program as follows:
A preparer who wanted to participate would have to be registered with the IRS and have a valid Preparer Tax Identification Number, or PTIN. Under the program, preparers who sign up agree to take 18 hours of continuing education each year. That includes 10 hours on federal tax law topics, two hours on ethics, and a six-hour tax filing season refresher course. The refresher course includes a comprehension test of 100 questions.
If you complete the course work and pass the test, you would receive a record of completion that would be good for the filing season. You would also have a limited right to represent your clients before the IRS on issues pertaining to the returns you prepared for them. To keep your qualification and practice rights current, you would have to take the courses and pass the test each year.
If that sounds familiar, it is. It is very similar to the requirements which were part of the previous RTRP requirements; in fact, Campbell indicated that those who had successfully completed the RTRP requirements before it was nixed would be entitled to exempt out of the refresher course.
So what’s the appeal of the voluntary program? Why take tests and hours of continuing education if no one is forcing you? The idea is that preparers who don’t already have professional credentials (in contrast to those that do, including tax attorneys, certified public accountants and enrolled agents) can “stand out from the competition” by offering clients a recognizable record of completion. It is similar to other standards, like those in the computer industry, where having a certificate indicates that you have done some level of testing and education beyond that of your peers.
As an added bonus, those preparers who successfully participate in the program will be listed in a new tax preparer database, which will be available to taxpayers on the IRS website at IRS.gov by January 2015. The database will also include attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents and enrolled actuaries who have registered with IRS. (*Insert your tech-related, Lois Lerner email joke of choice here.*)
Nina E. Olson, the National Taxpayer Advocate, has long been a proponent of tax preparer regulation: she has been urging Congress to move forward on such a program since 2002. Post-Loving, Olson has pushed Congress to pass legislation to authorize the IRS to reinstate the RTRP program. In the interim, she had recommended that the IRS adopt a voluntary program similar to the RTRP program.
Olson greeted the announcement of the new voluntary program with cautious optimism. She did, however, have an issue with one piece of the proposal. She is concerned “that it does not require preparers to pass a competency test in order to be listed in the IRS database,” saying, “In my view, individuals who cannot pass a minimum competency test should not be preparing tax returns.”
Olson went on to say that such an oversight could confusing for clients since “if the IRS includes names of preparers in a searchable database, some taxpayers will erroneously assume those listed have been determined by the IRS to meet basic competency standards.” She did, however, concede that “the IRS is trying to do what’s feasible for the 2015 filing season and it’s too late in the year to offer a voluntary competency test before January.”
But didn’t Commissioner Koskinen indicate that testing was part of the process? He did. But there’s a distinction: Commissioner Koskinen is referring to sets of comprehension questions that will be administered throughout the country by individual continuing education providers. That’s significantly different from the uniform competency test that IRS had created for the prior RTRP program. Under the new rules, it’s highly possible that two different tax preparers could have two different testing experiences and demonstrate two different levels of competency: they’d still get the same certificate. It’s kind of like asking each of the 203 accredited law schools in the country to offer up a semester exam that would serve as a replacement for the bar exam. The result could be confusing for consumers.
That’s an issue that might get sorted out as the program gathers steam. As a relatively last minute fix for the 2015 tax season, implementing a uniform test would be challenging at best – and expensive. If Congress does approve legislation that would give IRS the authority to regulate preparers (a big assumption) and that authority isn’t challenged in the courts (an even bigger assumption), a single, uniform competency test will likely find its way back into the program.
The IRS intends to do a public awareness campaign for the 2015 tax season to help educate taxpayers about the value that competent, qualified return preparers provide. As part of the campaign, they intend to highlight the importance of either being a credentialed preparer like a CPA, enrolled agent or attorney, or participating in this new Annual Filing Season Program. It might help allay Olson’s fears if IRS included specifics about the program in that campaign – including the testing – but that’s just my take.
The announcement was met with mixed results in the tax professional community. The largest tax preparation company in the country, H&R Block, responsible for preparing more than 22 million U.S. individual income tax returns last year, immediately offered a statement of support for the program. H&R Block referred to the voluntary certification program “essential for protecting consumers.” H&R Block President and CEO Bill Cobb had issued a letter to Commissioner Koskinen (downloads as a pdf) formally offering an endorsement of the program in advance of the announcement. H&R Block was a significant champion of the prior, mandatory program.
I expected veteran tax preparer Bob Flach to be impressed with the program. He’s been a vocal opponent to mandatory requirements for tax preparers for awhile – and has supported the idea of a voluntary program. Much to my surprise, Flach isn’t a fan of the proposal, calling it “one of the stupidest things I have ever come across.” Ouch! Flach believes that a program which “merely puts name of qualifying participants on a large and confusing list and issues a certificate to hang in the office – is of no real value to either the public or the industry.”
The American Institute of CPAs (AICPA) took it a step further, labeling the program “unlawful and improper.” In a strongly worded letter to Commissioner Koskinen (downloads as a pdf), AICPA Chairman of the Board of Directors William E. (Bill) Balhoff, CPA, CGMA, CFF and President and CEO Barry C. Melancon, CPA, CGMA voiced concern that the program “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.” AICPA believes, among other things, that the IRS does not have the statutory authority to move ahead with the program (notably, the AICPA believes that the IRS did not comply with the notice and comment requirements of the Administrative Procedure Act). When asked about the allegation, Commissioner Koskinen said that the IRS has vetted the program and they believe that the program complies with existing statutes.
What concerns the AICPA the most, however, is that “the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers, runs counter to evidence presented to the IRS, and will create market confusion.” I happen to agree but perhaps for slightly different reasons than the AICPA.
Those of you who have followed my coverage of the original proposal to regulate tax preparers (as announced by former IRS Commissioner Doug Shulman) and subsequently, Loving, know that I have not been a fan of most of the regulation proposals. I’ve long believed that the attempt to regulate has, to date, resulted in too many holes (your trademark attorney would be allowed to prepare tax returns without oversight but a long time tax preparer would not), held the potential for increased prices to consumers, is somewhat duplicative (mechanisms already exist for dealing with unscrupulous preparers) and ultimately, will create an uptick in the black market of so-called “ghost preparers.” I say that because, as an attorney, I get to clean up messes for taxpayers. The proposed program doesn’t offer much in the way of protection to stop those messes from happening. The bad guys are the bad guys: forcing you to take ethics courses doesn’t change that. Incompetent and lazy preparers are incompetent and lazy: forcing someone to sit through continuing education courses (likely while text messaging, trust me, I’ve been a speaker at these things) doesn’t make that person smarter or more conscientious.
The reality is that smart, competent tax professionals do the right things already. Those folks are the ones who sign up for continuing education courses even when they’re not required because they want to stay sharp. Those folks are the ones that don’t need an ethics course to remind them not to steal from their clients or to sell a client’s information. Those folks are the ones who are reading the IRS bulletins and staying informed. Those folks are the ones that know that they should turn down work that is beyond the scope of what they can do (not all tax professionals can do a corporate return or a fiduciary return – as with other professions, there are specialties and niches). Those folks are the ones that meet deadlines and encourage compliance. (For more information on choosing a tax preparer, click here.)
I appreciate the enormity of the challenge that IRS faces with trying to crack down on incompetent and unethical tax professionals. And I applaud the Taxpayer Advocate for her efforts to help taxpayers make good choices. But I agree with the AICPA and others who express concern that we might be creating a market confusion monster. Expect to hear more from tax preparers, from IRS and with any luck, Congress, about this issue in the run up to the 2015 tax season.
There will be a tax preparer certification program after all. That was the word from Internal Revenue Service Commissioner John Koskinen.
If you’re scratching your head after Loving v. Commissioner and wondering how that’s possible, here’s your answer: the program will be voluntary. Following losses at the lower court and the appellate court which held that IRS did not have the authority to regulate preparers, the IRS dropped the matter. For the 2014 tax season, tax preparers were required to have a preparer tax identification number (PTIN) but were not required to engage in testing or continuing education requirements; similarly, the new Registered Tax Return Preparer (RTRP) designation was no longer relevant.
Nonetheless, the IRS was not to be deterred in its plan to regulate preparers. Despite objections from many in the industry, the IRS is now forging ahead with a voluntary program which will be in place by the 2015 tax season. That announcement was made on June 26, 2014, by Commissioner Koskinen via teleconference. He was joined on the call by Carol A. Campbell from the IRS Return Preparer Office (RPO).
Koskinen acknowledged that due to the complexity of the Tax Code, the majority of taxpayers use a paid tax preparer to assist with their taxes. Of those paid tax preparers, about 60% operate without regulation or oversight. The IRS found that “[a]lthough many of them do a good job, we have found that others are poorly equipped to assist taxpayers in preparing returns.”
To combat what the IRS perceives as a lack of oversight, they’re launching the Annual Filing Season Program. It is both voluntary and temporary. Commissioner Koskinen hopes that the “temporary” label doesn’t stick: he is hopeful that Congress will enact a proposal in the President’s Fiscal Year 2015 Budget that would give the IRS the authority for mandatory oversight of return preparers.
Referring to the voluntary program as “not the ideal solution,” the Commissioner explained the details of the program as follows:
A preparer who wanted to participate would have to be registered with the IRS and have a valid Preparer Tax Identification Number, or PTIN. Under the program, preparers who sign up agree to take 18 hours of continuing education each year. That includes 10 hours on federal tax law topics, two hours on ethics, and a six-hour tax filing season refresher course. The refresher course includes a comprehension test of 100 questions.
If you complete the course work and pass the test, you would receive a record of completion that would be good for the filing season. You would also have a limited right to represent your clients before the IRS on issues pertaining to the returns you prepared for them. To keep your qualification and practice rights current, you would have to take the courses and pass the test each year.
If that sounds familiar, it is. It is very similar to the requirements which were part of the previous RTRP requirements; in fact, Campbell indicated that those who had successfully completed the RTRP requirements before it was nixed would be entitled to exempt out of the refresher course.
So what’s the appeal of the voluntary program? Why take tests and hours of continuing education if no one is forcing you? The idea is that preparers who don’t already have professional credentials (in contrast to those that do, including tax attorneys, certified public accountants and enrolled agents) can “stand out from the competition” by offering clients a recognizable record of completion. It is similar to other standards, like those in the computer industry, where having a certificate indicates that you have done some level of testing and education beyond that of your peers.
As an added bonus, those preparers who successfully participate in the program will be listed in a new tax preparer database, which will be available to taxpayers on the IRS website at IRS.gov by January 2015. The database will also include attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents and enrolled actuaries who have registered with IRS. (*Insert your tech-related, Lois Lerner email joke of choice here.*)
Nina E. Olson, the National Taxpayer Advocate, has long been a proponent of tax preparer regulation: she has been urging Congress to move forward on such a program since 2002. Post-Loving, Olson has pushed Congress to pass legislation to authorize the IRS to reinstate the RTRP program. In the interim, she had recommended that the IRS adopt a voluntary program similar to the RTRP program.
Olson greeted the announcement of the new voluntary program with cautious optimism. She did, however, have an issue with one piece of the proposal. She is concerned “that it does not require preparers to pass a competency test in order to be listed in the IRS database,” saying, “In my view, individuals who cannot pass a minimum competency test should not be preparing tax returns.”
Olson went on to say that such an oversight could confusing for clients since “if the IRS includes names of preparers in a searchable database, some taxpayers will erroneously assume those listed have been determined by the IRS to meet basic competency standards.” She did, however, concede that “the IRS is trying to do what’s feasible for the 2015 filing season and it’s too late in the year to offer a voluntary competency test before January.”
But didn’t Commissioner Koskinen indicate that testing was part of the process? He did. But there’s a distinction: Commissioner Koskinen is referring to sets of comprehension questions that will be administered throughout the country by individual continuing education providers. That’s significantly different from the uniform competency test that IRS had created for the prior RTRP program. Under the new rules, it’s highly possible that two different tax preparers could have two different testing experiences and demonstrate two different levels of competency: they’d still get the same certificate. It’s kind of like asking each of the 203 accredited law schools in the country to offer up a semester exam that would serve as a replacement for the bar exam. The result could be confusing for consumers.
That’s an issue that might get sorted out as the program gathers steam. As a relatively last minute fix for the 2015 tax season, implementing a uniform test would be challenging at best – and expensive. If Congress does approve legislation that would give IRS the authority to regulate preparers (a big assumption) and that authority isn’t challenged in the courts (an even bigger assumption), a single, uniform competency test will likely find its way back into the program.
The IRS intends to do a public awareness campaign for the 2015 tax season to help educate taxpayers about the value that competent, qualified return preparers provide. As part of the campaign, they intend to highlight the importance of either being a credentialed preparer like a CPA, enrolled agent or attorney, or participating in this new Annual Filing Season Program. It might help allay Olson’s fears if IRS included specifics about the program in that campaign – including the testing – but that’s just my take.
The announcement was met with mixed results in the tax professional community. The largest tax preparation company in the country, H&R Block, responsible for preparing more than 22 million U.S. individual income tax returns last year, immediately offered a statement of support for the program. H&R Block referred to the voluntary certification program “essential for protecting consumers.” H&R Block President and CEO Bill Cobb had issued a letter to Commissioner Koskinen (downloads as a pdf) formally offering an endorsement of the program in advance of the announcement. H&R Block was a significant champion of the prior, mandatory program.
I expected veteran tax preparer Bob Flach to be impressed with the program. He’s been a vocal opponent to mandatory requirements for tax preparers for awhile – and has supported the idea of a voluntary program. Much to my surprise, Flach isn’t a fan of the proposal, calling it “one of the stupidest things I have ever come across.” Ouch! Flach believes that a program which “merely puts name of qualifying participants on a large and confusing list and issues a certificate to hang in the office – is of no real value to either the public or the industry.”
The American Institute of CPAs (AICPA) took it a step further, labeling the program “unlawful and improper.” In a strongly worded letter to Commissioner Koskinen (downloads as a pdf), AICPA Chairman of the Board of Directors William E. (Bill) Balhoff, CPA, CGMA, CFF and President and CEO Barry C. Melancon, CPA, CGMA voiced concern that the program “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.” AICPA believes, among other things, that the IRS does not have the statutory authority to move ahead with the program (notably, the AICPA believes that the IRS did not comply with the notice and comment requirements of the Administrative Procedure Act). When asked about the allegation, Commissioner Koskinen said that the IRS has vetted the program and they believe that the program complies with existing statutes.
What concerns the AICPA the most, however, is that “the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers, runs counter to evidence presented to the IRS, and will create market confusion.” I happen to agree but perhaps for slightly different reasons than the AICPA.
Those of you who have followed my coverage of the original proposal to regulate tax preparers (as announced by former IRS Commissioner Doug Shulman) and subsequently, Loving, know that I have not been a fan of most of the regulation proposals. I’ve long believed that the attempt to regulate has, to date, resulted in too many holes (your trademark attorney would be allowed to prepare tax returns without oversight but a long time tax preparer would not), held the potential for increased prices to consumers, is somewhat duplicative (mechanisms already exist for dealing with unscrupulous preparers) and ultimately, will create an uptick in the black market of so-called “ghost preparers.” I say that because, as an attorney, I get to clean up messes for taxpayers. The proposed program doesn’t offer much in the way of protection to stop those messes from happening. The bad guys are the bad guys: forcing you to take ethics courses doesn’t change that. Incompetent and lazy preparers are incompetent and lazy: forcing someone to sit through continuing education courses (likely while text messaging, trust me, I’ve been a speaker at these things) doesn’t make that person smarter or more conscientious.
The reality is that smart, competent tax professionals do the right things already. Those folks are the ones who sign up for continuing education courses even when they’re not required because they want to stay sharp. Those folks are the ones that don’t need an ethics course to remind them not to steal from their clients or to sell a client’s information. Those folks are the ones who are reading the IRS bulletins and staying informed. Those folks are the ones that know that they should turn down work that is beyond the scope of what they can do (not all tax professionals can do a corporate return or a fiduciary return – as with other professions, there are specialties and niches). Those folks are the ones that meet deadlines and encourage compliance. (For more information on choosing a tax preparer, click here.)
I appreciate the enormity of the challenge that IRS faces with trying to crack down on incompetent and unethical tax professionals. And I applaud the Taxpayer Advocate for her efforts to help taxpayers make good choices. But I agree with the AICPA and others who express concern that we might be creating a market confusion monster. Expect to hear more from tax preparers, from IRS and with any luck, Congress, about this issue in the run up to the 2015 tax season.