Thursday, December 5, 2013


Earlier this week, over at TAXPROTODAY.COM, a component of ACCOUNTING TODAY, staff writer Jeff Stimpson asked the tax preparer community “Should the RTRP Survive?
Since I had already discussed the issue at ACCOUNTING TODAY in my earlier editorials “It’s Time for Independent Certification for Tax Preparers” and “What the IRS Should Do About the RTRP” I did not respond to Jeff’s request for comments.  But I will address the question here and now.
I do believe an RTRP-like credential for non-EA tax preparers (including CPAs, attorneys, and supervised employees thereof) should survive, but the IRS mandatory RTRP regulation regime should not survive.
I predict that it will not.  The IRS will lose its appeal of Loving v IRS and the original decision will be upheld – killing mandatory testing and regulation. 
And I do not believe that Congress will give the IRS the authority to revive mandatory testing and regulation via legislation.  As a result of multiple publicly aired FUs – TAX PROF Paul Caron’s posts on these FUs are now up to “The IRS Scandal, Day 209” – Congress is not going to give the IRS any more responsibility.  And besides, the current idiots in Congress can’t accomplish anything of consequence.   
As most of you know I have been preparing 1040s for more than 40 years.  I have never become a CPA because I had no desire to audit financial statements, and I have never become an Enrolled Agent (EA) because I had no desire to represent taxpayers before the IRS.  I have always been an “unenrolled” preparer.
Prior to the initiation of the IRS mandatory regulation I, or any ther paid tax preparer, have never been required to become “licensed” via testing or to take CPE in taxation.  I have, for about 30 years now, taken each year on average twice as much CPE in taxation as the 15 hours required under the RTRP regime.  I also have been “regulated” by the IRS in that I can be sanctioned and penalized by the Service for a variety of “indiscretions” under Circular 230.
When it appeared that the IRS mandatory regulation program was a fait accompli I supported the program as preferable to having mandatory regulation legislated by the idiots in Congress, but vocally campaigned for necessary corrections to the published regulations -  i.e. removing the exemption from testing and CPE in taxation for CPAs and attorneys who wanted to prepare 1040s for compensation, and supervised employees thereof, and instituting a “grandfathering” exemption from the initial competency test for “experienced” tax professionals.
While I did not support the component of the Loving argument that suggested the cost of mandatory annual CPE was “prohibitive”, I did agree with the argument that the IRS does not have the authority to regulate all preparers, and was “pleased as punch” when the Institute for Justice was victorious.
I do believe that the IRS needs a central registry of paid tax preparers, which has been accomplished via the requirement that all paid preparers register with the Service and receive, and maintain, a Preparer Tax Identification Number (PTIN).
I also believe that there should be a voluntary industry and government accepted designation for the non-EA preparer, to provide much overdue “respect” for the “previously unenrolled” preparer and to identify to the taxpayer public those paid preparers who have demonstrated that they are competent (via testing) and current (via required annual CPE in taxation) in 1040 preparation.
During my decades as a paid tax preparer there have been several attempts at creating a legitimate tax preparer “credential” other than EA, most by individual tax preparer membership organizations.  But none of these attempts have succeeded because the credential did not have industry-wide or government acknowledgement or acceptance.
There currently exists the Accredited Tax Preparer (ATP) and Accredited Tax Advisor (ATA) credentials administered by the Accreditation Council for Accountancy and Taxation, which is affiliated with the National Society of Accountants.  While the requirements for attaining these initials may be legitimate, they have no real value because there is no industry-wide or government acknowledgement or acceptance.
While I believe a non-EA tax preparer credential would best be administered by an independent industry-based organization, I would accept a voluntary RTRP designation administered by the IRS as part of a two-tiered program that incorporates the Enrolled Agent credential. 
The RTRP designation should not be considered equal to the current EA designation.  Under a two-tiered voluntary program the RTRP would be a like a bachelor’s degree and the EA, with perhaps a better name, would be a master’s degree.  Under the original RTRP program many EAs unnecessarily sat for the RTRP exam in order to receive the lower designation because it was easier to explain to the taxpayer public what a Registered Tax Return Preparer was.  The designation Enrolled Agent has always been misunderstood by the public. 
I was pleased to see my tax-blogosphere buddies Jamaal Solomon of TAX FACTOR and Bruce McFarland, the MISSOURI TAXGUY, quoted in Jeff’s piece.  Both agree with me, as do just about all the tax pros quoted in the article, that there is a need for an RTRP-like designation, and both also agree it should be voluntary.
I do take exception to one of the comments in the article from Teddy Prioleau from Maryland.  He says “This {mandatory regulation by the IRS} began as a result of a great outcry from taxpayers caught in the middle of a very disconcerting situation between the IRS and, many times, a less-than-upstanding preparer who took liberties with the return.”
This is not true.  There was no public outcry, great or otherwise, for mandatory tax preparer regulation.  In all my years in the business I do not remember there ever being a call by taxpayers to license tax preparers.  The IRS initiated its regulation program in response to a Government Accountability Office (GAO) study which resulted in a report titled “Paid Return Preparers: In a Limited Study, Chain Preparers Made Serious Errors” and a similar TIGTA study.
I also disagree with Cynthia Jeanguenat of Virginia, who stated, “Oregon, California and New York have stringent regulation”.

While Oregon and California do indeed have stringent tax return preparer regulation regimes, New York State does not.  NY has been talking about instituting testing and CPE requirements for tax pros, but currently its tax preparer registration program is nothing more than another way to raise money.  It does not require any proof of competence or currency in state or federal tax law.  All it does is charge “unenrolled” preparers a $100 per year extortion fee for the privilege of being able to prepare NY state tax returns.
So there you have it – my more than 2 cents on the question “Should the RTRP Survive?”.  Any comments?


Chris Johnson, EA said...

Great post, Bob!

I'm an EA who has posted here before who actually agrees with this post, for the most part. I'm not totally against regulation of tax preparation, but don't have anything good to say about the RTRP designation either, partly because I believe it would dilute the value of my own EA designation but also partly because mandating such a designation would only push the "underground" tax preparation business further underground. You know what I'm talking about- people who prepare tax returns, sometimes using pirated software, only take cash for their services, no PTIN on the return and there is no written record of them preparing the return anywhere. The RTRP designation is not going to put an end to that. Also, there are many other unenrolled prepares like yourself who have prepared returns for satisfied clients for many years without any real problem. While I believe my EA designation adds to my marketability (and also allows me to do other things such as audit representation, which I actually enjoy sometimes), I think that would-be clients should be free to choose who prepares their returns and it all comes down to personal choice.

There are some people out there who will only go to a CPA to prepare their taxes, no doubt I've lost out on a few would-be clients because of that, but I do just fine as an EA, and from the looks of it you do just fine as well.

I do think that continuing education is essential in the tax business, as tax codes are always changing and you can never know too much tax and of couse I must do it to maintain my EA designation. While it's great that you choose to do continuing education, I am certain that not every unenrolled preparer chooses to do so. Perhaps the IRS thinks that the RTRP designation would force more of those in the business to take continuing education but again, those in the "underground" tax preparation community will never abide by such a rule anyway.

Anyway, keep up the good postings!

Robert D Flach said...


Thanks for your, as usual, excellent comments.

I have always felt that extensive CPE in taxation, although not in ethics, iss truly a "necessary" expense for the serious tax preparer, for the reason you mention.

What do you think about my suggestion for a "two-tiered" credential program that combines the RTRP and the EA designations, but puts the two credentials in perspective - i.e. EA is superior to RTRP?

I hope you will continue to read, and comment on, TWTP.


Chris Johnson, EA said...

Hey Bob,

The two-tiered credential program involving the RTRP and EA would probably be a good idea - the EA designation would be less obscure and wouldn't be diluted by the RTRP designation like it has been (to some small extent anyway). Both credentials are administered by the IRS anyway, so how hard could it be for them to do?

At the end of the day, it could be a lot of free publicity for the EA designation, so I guess I'm all for it! Too many automatically assume that CPAs are the only people who can do tax returns, yet plenty of CPAs don't belong anywhere near a tax return.

Have a nice weekend.

Les Book said...

Excellent post. I think making the designation (and testing and ed) voluntary is something IRS will think about if as you rightfully suspect the DC Circuit Court of Appeals Loving does not reverse the district ct.

I have written a post with Susan Morgenstern that riffs on the voluntary aspect of return preparer registration see

The end of the post we discuss ways how IRS may incentivize people to go to those who voluntarily agree to get designated. I think some sweetener is needed to get people to go to preparers who have received annual continuing ed.

As to the two -tiered credential, I think that is a very clever idea.