Friday, June 19, 2009


There has been much discussion lately, to which I have added several cents worth myself (see my post “License and Registration, Please”), on the regulation of “unenrolled” tax preparers, resulting from IRS Commissioner Doug Shulman’s recent comments.

I have come across comments and statements from state CPA organizations and the AICPA itself (i.e. AICPA issues briefing on “Federal Regulation of Tax Preparers”) that, while supporting “the implementation of high professional standards for tax practitioners”, they are basically against government registration and regulation of unenrolled practitioners. The AICPA briefing mentioned above states “we are not convinced that Congressional proposals calling for the regulation of unlicensed tax practitioners will accomplish the stated objectives advanced by the proponents of such proposals”.

One wonders why the AICPA would be against the regulation of unenrolled preparers.

There is a serious misconception among the general public, and especially, it seems, among journalists, that only CPAs are qualified tax professionals. This is seen in print during tax season and throughout the year when “CPA” is used whenever the term “tax professional” or “qualified tax professional” or “competent tax professional” would be more appropriate.

When discussing tax issues we are told to “check with your CPA first”, or “be sure to consult with your CPA”, or “see a CPA” when what is actually meant, or should be meant, is “check with your tax professional first”, or “be sure to consult with your tax professional”, or “see a tax professional”.

To be sure just because a person has the initials CPA after his/her name does not mean that he/she is a tax expert. As I have said time and again - in my 37 years in “the business” I have seen more errors on tax returns made by CPAs than by any other “class” of preparer.

If unenrolled tax preparers are required to be registered, licensed, and regulated, with required initial proficiency exams and annual minimum CPE credit hours, the result would be a “licensed tax preparer” or some similar federal designation. And, presumably, only “licensed tax preparers” would be allowed to professionally prepare tax returns.

Now I am not talking about practice before the IRS. “Licensed tax preparers” would be permitted to prepare tax returns only. Practice before the IRS, I expect, would continue to be limited to EAs, CPAs and attorneys. And I also expect that EAs, CPAs and attorneys would be automatically “grandfathered” in as “licensed tax preparers”.

However, while CPAs would be exempt from any initial proficiency test, those who want to be able to prepare tax returns should be subject to the same annual CPE credit requirements as the newly enrolled practitioners. If “licensed tax preparers” are required to take 30 CPE credits in “federal income taxes” each year to maintain their status, then CPAs who want to prepare tax returns should be required to take the same credits in federal income tax topics, and not just general accounting.

Enrolled Agents already have strict CPE requirements in federal taxation. And, to be honest, I doubt very many individuals have their 1040 prepared by a lawyer – who could afford it? Tax lawyers are generally used by individual taxpayers when it comes to the area of “problem resolution” – dealing with problems resulting from faulty, or considered faulty, 1040s or collection issues.

It is my firm belief that one of the main reasons why CPA organizations are against the creation of a “licensed tax preparer” designation, via the regulation of unenrolled tax practitioners, is that this will once and for all do away with the misconception that only CPAs are qualified tax preparers. Now journalists will be saying “check with your licensed tax preparer” and “be sure to consult with your licensed tax preparer” and “see a licensed tax preparer”.
CPAs do not want the competition - they want to continue to have the unjustified "upper hand" with the public in terms of erroneously perceived tax expertise that they now enjoy.

I have read credible opinions on both sides of the issue by individual CPAs, attorneys, CPA-Attorneys, Enrolled Agents and unenrolled tax professionals, and do not doubt one bit that the individuals expressing these opinions are sincere and not just self-serving. There are legitimate arguments both pro and con.

But one thing I do know is that if all tax preparers were regulated via a “licensed tax preparer” designation it would rightfully put all qualified and competent tax professionals on an equal footing in the eyes of the public, and do away with the erroneous “urban tax myth” that CPAs, and only CPAs, are tax experts.



Bruce said...

"Holly power wash Batman. . ."

I wish I had stayed home to read this yesterday.

Regardless, perfectly spoken, and I agree 100%, on all points.

Jeff Beckley CPA said...


You make some very good points about the "'urban tax myth' that CPAs, and only CPAs, are tax experts." I agree that you don't have to be a CPA to be qualified to prepare a tax return.

But we must keep in mind that many returns are prepared by unlicensed preparers and tax software. If all preparers are required to be licensed, the cost for professional tax preparation will increase and many will turn to self-preparation through software thereby increasing the risk of error. I don't see how requiring tax preparers to be licensed serves the consumer any better.

The AICPA's position is clearly not an attempt to monopolize the tax preparation industry: "The AICPA believes the IRS already has the tools necessary to ensure reduced-error tax returns and proper registration methods and should resist overburdening tax preparers with redundant and potentially costly regulation requirements."

In reality, this proposal is an attempt by the IRS to further impose taxpayer and preparer penalties that add no value to the tax prep industry. We should stick together on this issue and petition against adding further bureaucracy and expense to our industry and the taxpayers we serve.

Jeff Beckley, CPA