Monday, January 10, 2011


The IRS recently issued regulations that, while they must register with the IRS, pay the fee, and receive a PTIN, employees of CPA firms, who are “supervised” by a CPA, that work on, but do not sign, a federal income tax return are exempt from the competency test and CPE requirements.

As I mentioned in a recent BUZZ installment, Trish McIntire of OUR TAXING TIMES takes exception to this regulation in her post “No! Bad IRS!” at OUR TAXING TIMES, and I agree with Trish’s opposition to the policy.

As I quoted Trish –

First, since CPAs are not subject to the testing, how does the IRS know they are qualified?

And -

My second issue is the supervisory question. I am sure there are firms with serious documentation and review procedures in place. The CPA signer makes sure the return is correct. But how many firms just give the returns a look over, especially the easy(?) parts, and slap a signature on the return. After all they can charge more if the CPA signs the return than if the intern does.”

Many, many years ago I was one of these individuals employed by a CPA firm, Deloitte Haskins + Sells (one of the then “big eight”), as a “para-professional”, and “supervised” by CPAs, who prepared 1040s for the firm’s small business clients. I was obviously not a CPA, and I was also did not have a college degree in Accounting or Finance. To be honest it was so long ago that I do not remember if I personally signed the returns I prepared, or if they were signed by the “supervisory” CPA.

In applying for the position I had to take a very brief and basic test in bookkeeping and accounting (I was told that I had the highest score of any applicant at that time). I do not recall if there were any 1040 questions on the test. I was not provided any other training or instruction in any aspects of bookkeeping, accounting or tax return preparation (1040, 1065 or 1120) during my employment. Yet I was expected to prepare 1040s.

None of the 1040s I prepared were corrected or adjusted by any of the reviewing CPAs, I expect as they were correct as originally prepared, so I had no indication of the extent of the “review”. As far as I knew the reviewng CPAs merely “signed off” on the return.

Luckily I knew what I was doing, having prepared federal income tax returns for several years. Actually, because of my knowledge and experience in individual income tax preparation, it was the CPAs who came to me with their 1040 questions instead of the other way around. And I found errors in prior year returns that had been prepared by a CPA and “reviewed” by several additional CPAs.

I am not writing this post to “toot my own horn” – but to show that I did not have to prove to my employing CPA firm via testing that I had any knowledge of the Tax Code, I did not receive any training from the firm in tax preparation, and I was not required by the firm to take CPE in anything. Yet I prepared “substantially all” of several federal and state income tax returns.

To be fair this was truly many, many years ago. I have no knowledge of the testing or training requirements of similar employees of Deloitte Touche, or any other CPA firm, today. But I doubt if there have been any changes.


1 comment:

Peter Reilly said...

Although there was no testing, my own experience with a local firm was much different. Reviewers there conisdered the review process an opportunity to toruture the prepaprers. It is amazing we ever got anything out of the office. There were tax questions on the CPA exam. CPA's have been subject to Treasury Circular 230.
Regardless, I think I agree with you anyway.