Alban emphasized that his group is not challenging the Preparer Tax Identification Number, or PTIN, registration requirements, which enable the IRS to track all the returns prepared by a particular tax preparer. “If someone is consistently doing something that the IRS thinks is potentially in violation of the law, they can much more easily catch that sort of behavior and notice patterns in the returns that are filed, and do something about it in enforcing the existing laws,” said Alban. “The idea basically is if there are a few bad apples, you shouldn’t crack down on everyone. Instead use the tools you already have to figure out who those bad apples are and go after them and not impose substantial costs on people who are completely above board and doing a good job, but are forced to bear costs that in some cases are so substantial that they are being forced out of business altogether.”
Chuck McCabe, president and CEO of Peoples Income Tax in Richmond, Va., supports many of the IRS’s aims, but he also sees good reason for the lawsuit. “The IRS is pretty far along in the regulations, and it’s already been implemented,” he said. “I’m in favor of the regulations. I think they’re necessary in our industry because there are a lot of incompetent preparers out there who don’t have the qualifications to do tax returns. They should be licensed to cut someone’s hair, but not to do their taxes. I’m not opposed to regulation itself, but what I would be opposed to is the IRS using the regulations as a source of revenue by charging fees beyond what their costs are.”
He believes the cost of administering the PTIN would probably be recovered after the first year, but with each annual renewal it will become a continuing revenue stream for the IRS. “It’s kind of like a toll for the road,” said McCabe. “They usually implement the tolls to build a new road or fix it, but once the road is built the toll never seems to go down. I would be concerned that the fees the IRS charges for the different elements of the regulation not exceed their costs because it wouldn’t be fair to independent tax business owners to become a source of revenue for the IRS.”
McCabe also believes the requirements imposed on the registered tax return preparers in the expanded Circular 230 requirements are excessive relative to their responsibility. “I’m concerned that the IRS is relegating their oversight of taxpayers to tax practitioners because they don’t get enough money from Congress to do their job,” he said. “But I don’t think it would be a good idea to kill the profession of tax preparers.”
33 Comments
Well, it looks like the plantiff's won the first round...what is really strange to me is the fact they we are to be regulated...blah, blah, blah...but the IRS lets any Joe off the street go into their website and file their own taxes without any experience at all!!!!!!! Go figure!
Posted by: ransgirl | January 22, 2013 9:27 AM
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Do we need to have education yes...as a former IRS examiner I do see the need for education. However I do not need to see folks being run out of business merely because 'their clients' repeat THEIR CLIENTS many of them older DO NOT WANT TO FILE ELECTRONIC RETURNS. A lot of them grew up old school and have seen times when 'electricity' doesn't work. What if your practice has more then 11 such individuals; according to the regulations you must make these tax payers sign all types of forms attesting to NOT e-filing and then tell them you CANNOT have anything more to do with the return. They must mail it. Next you will be telling me that the DEPT of TREASURY HAS OUTLAWED PAPER MONEY AND WE MUST HAVE ALL our transactions on DEBIT CARDS OR CREDIT CARDS. Again.. what is the backup plan for when a Hurricane,NATURAL DISASTER OR THE ELECTRIC GRID GOES DOWN. Do we then become so addicted to the electronic way or no way...I think the IRS is painting itself into a corner.
Posted by: DDTS | December 13, 2012 4:19 PM
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THERE NEEDS TO BE CREDITIALS...BUT AS USUAL ....GOVERNMENT IS NOT PREPARED TO HANDLE IT EFFECTIVELY......AN OPEN BOOK TEST? EXPERIMENTAL QUESTIONS ON THE TEST?...AND A FREE PASS FOR SOME WHO MAY HAVE LIMITED TAX EXPOSURE....YEAH...YEAH...A GOVERNMENT PROGRAM FOR SURE! I PASSED THE TEST AND I THINK IT IS A FARCE......
Posted by: BIG JIM | September 2, 2012 7:18 PM
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This is the IRS going way too far! I wholeheartedly disagreee with the annual "renewal fee". It is ludicrous to charge us an additional fee for a number that never changes. Isn't the EFIN enough when we are required to electronically file returns?
Furthermore, someone mentioned that the test is open book. That's not what I've read, otherwise I'll just take my JK Lasser book with me! I've had over 8 years of professional experience working under a public accountant and doing taxes and now two full years of doing them on my own. I've gone through the H&R block course, but it didn't offer much more than I already knew through experience. And if I want to be sure to pass the test the first time I have to pay for prep courses!
The price of the education for CE points is well over $2000 including travel and hotel. I hope this case is appealed and wins.
Posted by: aldrenus | June 12, 2012 1:24 PM
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I am a paralegal and prepare fiduciary returns and business information returns, as well as final 1040's for our probate clients. So, I am NOT a tax preparing business and this really hit our business too. We've been preparing these taxes since 1978, and have kept up to date in tax preparation as well as our legal estate business, taking costly seminars annually in both arenas. But putting this additional burden on our business just about puts us out of business. The returns we file are pretty specialized and most often fail the efiling requirement for various reasons, causing us to pay for the efiling, and then having to prepare and file paper returns anyway. We have both had PTIN's from when they were first issued, as well as CAF numbers. We do returns for many of the attorneys we work for and have had to redo returns prepared by CPA's for the final 1040's as well as 1041's due to their lack of understanding these special issues. While I am wholely in favor of regulation, I too believe they should be equally applied. CPA's and Attorneys, unless they practice tax law or do tax prep have no clue as to what they're doing, and without extensive continuing education in the tax arena should NOT be preparing taxes, much less be exempted from the regulation the rest of us are now faced with. The only ones I'd exempt are the EA's who are specialized in tax work and their continuing education is directly related to tax. I'll be interested in watching this case as it plays out, but I fear it is without merit. I'd also like to see a panel meting out justice if needed, and not one lonely IRS agent without recourse.
Posted by: NotZenEnough | April 4, 2012 8:43 PM
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I see this one hit a nerve Michael. I have never seen so many comments. Your readers might also be interested in this discussion on Isaac Brock related to the IRS actions. Google "IRS lacks authority to impose tax on tax by regulating tax preparers - Lawsuit alleges"
Posted by: Just Me | March 15, 2012 2:24 PM
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If the regulations just weeded out the three plaintiffs in the lawsuit, it would perform a valuable service. What a pathetic group of "professionals."
And, jszesq, implying that EAs are not competent reveals a stunning level of ignorance.
Posted by: cversich | March 15, 2012 12:28 PM
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I have been a sole practioner for 12 years. Worked for a sole practioner CPA for another 26. I am 100% for education. I am 100% for regulating our industry.
The problem I see is that I am preparing amended returns for taxpayers because preparers with PTINs and ERO's are still lying cheating and stealing. My question which it may be too soon to tell is "are these requirements really weeding out the bad guys?"
All attorneys that prepare returns (other than tax attorneys) should be made to test. Makes sense.
The other problem I have is where is the education at the IRS? Why can you call three times and get three different "RIGHT" answers. And no one individual should be able to single out a preparer as having issues. It should not be a sole decision or a little person with alot of control can do alot of damage.
Posted by: Lenore | March 15, 2012 6:22 AM
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GIve me a break..this suit should be thrown out of court for being absolutely baseless.....the core group recognized under Circular 230...Attorneys and CPAs and grudgingly EA's thought they are not subject to the same level of regulations as the former two real professions have at least demonstrated a level of competence. As a CPA I had to complete a graduate degree to qualify for what I do.....the rule should mandate eFile for a single return prepared for a fee. If you don't know how to use a computer...better you are forced out and wind up bagging groceries. It is difficult enough to explain to a taxpayer what the differences in skill required to become a CPA as distinguished to get a job at H&R Block is....let alone articulate what we do in dealing with IRS Collection, Appeals,etc.....if you needed brain surgery would price be the driving factor in selecting a surgeon? ??
Posted by: jszesq@abizinabox.com | March 15, 2012 1:11 AM
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There is a better way to solve the problem people. We all should be subject to the same rules period there are no perfect Tax Professioinals.. Period CPA.
Posted by: JDAVIS | March 14, 2012 2:54 PM
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Well if the IRS wanted to track my quality of my tax return all they have to do is sort my return by the "EFIN" number. Electronic Filing Number. The PTIN number is being issued to force us to sign the contract of ethics. They need to tell the truth. !!! Without the PTIN number there is no contract and the new requirements cannot be enforced.
The IRS System is a failure as now the crooks can cheat the system by going directly to the IRS web page or of these free web sites to prepare their client returns..
It the system !!!!!!!!!
Posted by: JDAVIS | March 14, 2012 2:49 PM
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I have had a PTIN since 2002. That said, the mere fact that now I have to pay for something that was free.......!!! I have taken the test and paid the $116 to do so, drove 90 miles to the closest location, had to remove the chain from my glasses, remove my watch, turn my pockets inside out, scanned with a metal detector and what did I get....just a congratulations that I scored in the passing area. No score or what I missed.
That part I do not like. I want to know what I was week in so that I could research and study!
I think the fees to the little guy like myself are unfair, taking a test, well I was nervous and the letter even states that just becuase you passed, dose not mean that you are actually qualified. What was the point of the test then?
Posted by: srmc | March 13, 2012 9:12 PM
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I have had a PTIN since 2002. That said, the mere fact that now I have to pay for something that was free.......!!! I have taken the test and paid the $116 to do so, drove 90 miles to the closest location, had to remove the chain from my glasses, remove my watch, turn my pockets inside out, scanned with a metal detector and what did I get....just a congratulations that I scored in the passing area. No score or what I missed.
That part I do not like. I want to know what I was week in so that I could research and study!
I think the fees to the little guy like myself are unfair, taking a test, well I was nervous and the letter even states that just becuase you passed, dose not mean that you are actually qualified. What was the point of the test then?
Posted by: srmc | March 13, 2012 9:12 PM
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I a tax preparer in Michigan for some 8 years now. I have been audited 2 for 2007 and 2009. The first audit costed me 4200.00 it was for the EIC. The auditor looked for informaation that I believe should be consider personal information from the tax preparer, like where is the father to the children, and why I had'nt enter his where abouts in the notes. The second audit said she had 71 returns to review but since I smoked in my home where I previously prepared taxes she would find me for all 71, whiched costed me 7100.00 in 2010. I feel as though I have complied with the due deligence and that is not one of the questions, so why do we the little people have to suffer. I am all for the test, but the IRS behaver, far as we the tax preparer doing there job. A cient has custody of her 4 yr niece they said I am to have a copy of the court papers in my file. No! I am to inform my client if they are audited these would be papers they would want. I don't get paid for doing there job. I feel as though we are being violated with what they are doing it is unjust and unfair. Lets fight back.
Posted by: lachelle1225 | March 13, 2012 4:34 PM
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I hear the arguements but I don't agree this is not just about competence, it's about control.
With these PTIN's IRS has much greater and more arbitrary control over the tax community, if your card is double charged and you pull the fee IRS revokes your PTIN and YOU CAN'T PREPARE TAXES FOR A MONTH! No appeal, no hearing, no rights at all.
These tests are a new way IRS could selectively elliminate preparers they want gone. Think about it IRS knows what returns you prepare what you deal with they could just custome make a test on areas you don't deal with.
I'm glad they are fighting it.
Posted by: Tax_Man2.0 | March 13, 2012 1:09 PM
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The registration is simply windowing dressing to get the dog groomers to register. The tests don't prove much either. What is needed is peer review. That will weed out those incompetent preparers that are not already weeded out by the IRS sanctions....
Posted by: topbeancounter | March 13, 2012 11:54 AM
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And the arguments go on and on and on and always have. There will be no pleasing everyone in this because everyone will have their own opinions as to what should or should not be done, just like I do.
At moment we have to live by what the IRS says we have to do in the near forseeable future, in order to prepare taxes for a living.
Maybe the lawsuit will change things, we don't know but my gut tells me that no matter what the outcome of the lawsuit, paid tax preparers i'm afraid are going to have to go through constant new rules and regs every so often just to make a living, because it won't belong before those who want to cheat will find a way around these new tax prep rules and then the IRS will have to put more in place and so on and so on and so on....
Posted by: taxking | March 13, 2012 11:27 AM
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It doesn't protect anyone. Regulations are already in place to protect the public and more regulations are not the answer. All it will do is drive a lot of folks out of business and drive the price up higher for those of us who stay in.
Posted by: EA/CPA | March 13, 2012 9:32 AM
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Tax preparation can be a complex process and demands due process by professional preparers. As with any profession serving the public, those who participate should be held to professional standards. To suggest there need not be standards is naive at best and self-serving in many cases. Testing and demanding continuing education standards is one of the best moves made by IRS in quite awhile. It will protect the public from those who injure them financially every year with shoddy work. I say, "bravo" to the regulations.
Posted by: bsimmonscpa | March 13, 2012 9:21 AM
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I feel badly for the gentleman from Eagle, WI, but adapting to change is a key competency for anyone preparing taxes; especially in an environment where the code changes yearly. Steadfastly refusing to accept change and to accept professional oversight does not make one a better tax preparer. I am an enrolled agent and I am proud of the knowledge and the level of competence I bring to the table in serving my clients. Honestly, my feeling is that the people who are complaining about having to pass a simple competency exam shouldn't be professionally preparing taxes in the first place. If you cannot pass an open book (!!!) exam on basic tax theory then you have no business filing anyone's tax return, let alone charging for the service. It's as simple as that. Incompetent preparers shame our entire profession. No one is making it a requirement to pass the EA exams, just to prove that you can flip the pages of a Pub 17, for crying out loud.
Posted by: trixiespishak | March 13, 2012 9:13 AM
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I see both sides of the argument. My concern with the IRS Regs is "yes" it will/should make it more costly for tax preparation by 'licensed' folks... and it should. There are a couple of better reasons, logical/rational, that exam competency is needed: I taught Tax Preparers for a national chain (as seen on TV) and I have prepared thousands of high income 1040s, business and trust tax returns which included hundreds of IRS and other Tax Authorities inquiries and attempts to purloin the Taxpayer's refund and/or step over the legal bounds to grap Taxpayer dollars... I've had to cajole Attorneys and CPAs who the client hired to review/prepare the tax returns.... the IRS is wrong 99% of the time... and I don't recall when I/we lost an agruement with the clients Attorney/CPA... indeed, a memorable case, one bank who handled the trust told me to follow the attorney's ruling, but I kept after that attorney and after four or five rounds of jousting, this attorney aquiesses with "he whiffed on that one."
Testing and credentialing is needed... However, the IRS needs to be more friendly and allow Tax Prep Folks to so their thing... and run the business as a business. Taking away the 'debt indicator' stole a nice piece of the Tax Prep Business... The IRS and FDIC, now, have limited the Tax Prep Fees that can be authorized through Bank Products. Indeed, the IRS continues to put onerous and often ridiculous paperwork on the efile... privicy baloney and more paperwork to sign, and they cajole Taxpayers to claim the EITC as 25% who are eligible for the credit don't take it... and then the IRS puts ownerous rules, which puts the burden and the IRS's job onto the Tax Prep Firm which should be helping the Taxpayer "make their taxes less taxing." That is our firm's motto.
Most Taxpayers overpay on their taxreturn; as they do not understand the 60,000 pages of Federal Tax Regs let alone State, School District, Local, RITA, Sales, CAT, Sub-S, C-Corp, Schedule C, D nor most of A.... and all the rest of the schmooze.
Posted by: JFKEQUAL | March 13, 2012 9:08 AM
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Passing an exam does not ensure they will be done correctly. Anyone that thinks more government involvement will solve the problem is sadly mistaken. One just needs to look at the many cases of CPA and EA incompentance and fraud. I for one do not need the government looking out for me. I am able to determine who can prepare my taxes, cut my hair, watch my children, where I will eat, cut my grass, fix my electronics, fix my car. That being said I have passed the CPA exams, I am an EA and a CFE. As a matter of fact I have passed the EA exams twice, once by paper and once by computer. I have taken a total of 15 exams without one failing grade and the only thing that may prove is I'm a good test taker. Let me be clear, I am not saying we don't need government at all but on this issue move on federal government.
Posted by: EA/CPA | March 13, 2012 9:06 AM
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I believe that the RTP requirements are necessary to ensure that the tax profession is represented by trained tax preparers. The new requirements are not rigorous enough and The RTP regulations do not go far enough. The requirements should be CPA, Attorney and Enrolled Agents period-end of discussion. It is "kitchen table" and tax franchise tax preparers that are ruining the tax industry.
Posted by: garyh | March 13, 2012 9:05 AM
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I believe that the RTP requirements are necessary to ensure that the tax profession is represented by trained tax preparers. The new requirements are not rigorous enough and The RTP regulations do not go far enough. The requirements should be CPA, Attorney and Enrolled Agents period-end of discussion. It is "kitchen table" and tax franchise tax preparers that are ruining the tax industry.
Posted by: garyh | March 13, 2012 9:05 AM
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Unregistered tax preparers answer to no one. Many won't even sign the returns they prepare or report the income they make. I spend a good amount of time fixing returns and solving the huge problems untrained and unqualified tax preparers, many with a PTIN, have created for their clients. Registering tax preparers, requiring testing and a few hours of CPE will do a lot of good. If unqualified people can't continue to work because they won't or cant meet the standards, that is for the better of society.
Posted by: cromancpa | March 13, 2012 9:02 AM
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My situation is very similar to those in the lawsuit. I prepare a limited amount of tax returns each year at affordable prices. I have been preparing taxes returns for 20 years without any problems with the IRS. My tax prepartion base is repeat and word of mouth clients. Most have been using my services for five or more years. I have quite a few clients that I have been preparing tax returns for 20 years. I don't advertise tax preparation. I had the Preparer Tax ID long before it was required. It is unfortunate for people like me that don't break the rules and never try to do a tax return that is much more involved then I know I can handle. Not to mention my client base. I have a CPA and the IRS a phone call away if I have questions. I think it's fair to say my clients don't need to be protected from me.
Posted by: sandilynb | March 13, 2012 8:22 AM
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Mr. Killan is one of the old timers who has prepared tax returns by hand for most of his life and will not change. He is not subject to the e-file mandate because he does not use computer software. Furthermore, I do not understand how he makes a living with a 100 clients charging $ 30 - $ 75. The cost of living must be very low in Eagle, WI. He does not understand that there are a lot of scrupulous tax preparers who commit fraud for their clients by adding nonexistent deductions. This is why the IRS came up with this program. There is no true justification for fighting this and it is a frivolous lawsuit.
As far as Mr. Gambino is concerned, there are lawyers who do not prepare tax returns, but there are some who do. The ones who do are required to take continuing education courses each year like CPAS have to do. Tax preparers like Mr. Killan do not have this requirement. He is comparing apples with oranges.
Posted by: Vincent C | March 13, 2012 8:13 AM
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Any sort of regulation seems to fly in the face of liberty. However, being proven competent in the preparation of taxes is one I am in favor. As an enrolled agent, I had to prove my competency by taking a very comprehensive test. I studied for months on end and am all the better for it. When a client asks me a question, I know the answer or can find it quickly. Many people have their taxes prepared by "tax professionals" who may be nothing more than a computer operator. Software, no matter how good is no substitute for knowledge and experience. As for the elderly gentleman who manually files returns, I feel his aggravation. However, he is costing us the taxpayers many more additional dollars for people at the IRS to input the tax returns into the system. Then there is room for errors that rarely happen with efiled returns. And yes I do agree the exemption for CPA's and attorneys should require a minimum of taxation updates. I had a client whose returns had been prepared by a CPA which were totally in error costing the taxpayer $1,000's. I was able to recover some of the money which had not gone past the limitation statute.
Posted by: mikewEA | March 13, 2012 8:00 AM
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While I agree with PTIN registration, I also think that preparers, including CPA's and attorney's who do not actually prepare tax returns should be required to take the exam - just because you have a CPA behind your name or are an attorney does not mean you know how to prepare a tax return. I also beleive that financial planners should also have to take this test - I have personal experience of working with a financial planner who did not know how to properly prepare his own schedule C - he now refers his clients to me.
Posted by: BarbaraGheen | March 13, 2012 7:46 AM
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THIS LAWSUIT IS FOR THE PEOPLE, BY THE PEOPLE, AND OF THE PEOPLE.
Posted by: ellygumera | March 13, 2012 7:43 AM
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This lawsuit rather makes me sick. Are these people actual tax preparers or just preparer wanna bees?
Posted by: edmilotcpa | March 13, 2012 7:34 AM
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As a CPA, I've spent a lot of time amending taxes for people who had them prepared by an untrained prepared or by a lawyer. There are few areas more important to the consumer than getting their taxes done right. Anyone who cannot pass the competency test proves that they should not be preparing taxes. Could the fees be a little less? Sure. Should there be a competency test? If you want your taxes done right there should be. This is a very welcome move by consumers and professionals. If someone is supervised by a CPA, maybe there can be some flexibility. But the guy out there on his own flipping burgers by day and preparing taxes by night should be vetted before he handles anyone's taxes.
Posted by: wdylanp | March 13, 2012 7:04 AM
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I know of an attorney admitted to Tax Court that doesn't know what the "Kiddie Tax" is. I don't agree with attorneys preparing taxes without appropriate CPE specific to tax preparation.
I truly appreciate organizations such as the Intsitute for Justice who look out for the liberty that is being threatened. thank you!
Posted by: Taxpreparer | March 12, 2012 10:47 PM
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