by Roger Russell
The complaint by enrolled agents that they’re not getting the respect they deserve is heard less these days, as two provisions in pending legislation promise to raise the standards for commercial tax return preparers who are not attorneys, CPAs or enrolled agents, and to allow use of the enrolled agent designation in all states.
There is a tendency for people to lump enrolled agents together with other tax return preparers, despite the fact that enrolled agents are the only group to be nationally certified to a standard of proficiency in tax knowledge.
“We’re governed under Circular 230, the same as attorneys and CPAs,” said Jennifer MacMillan, a Santa Barbara, Calif.-based enrolled agent. “The only difference is that they don’t have to take an exam.”
Enrolled agents qualify for their certification by passing a two-day exam administered by the Internal Revenue Service or by having five years of experience with the IRS in a position that requires interpreting the tax code.
“We’ve been representing taxpayers before the IRS since 1913,” said Morgan Hill, Calif.-based EA Greg Steinbis, who is also a CPA. “Attorneys and CPAs have only been doing this since the late 1950s.”
“Moreover,” added Rockville, Md.-based EA Constance Kurtz, “attorneys and CPAs are limited to practice in the states which have licensed them, while enrolled agents can practice in all 50 states. I have clients in half a dozen states, as well as in England, France, Sweden, Australia and Hong Kong.”
The profession began in 1884, when Congress created enrolled agents to deal with problems arising from the Civil War, and many people had problems settling claims with the government for horses and other property confiscated for use in the war effort. Congress empowered enrolled agents to prepare claims against the government and to seek “equitable justice for the citizenry.”
For years, this was the primary purpose of the EA.
When the income tax law was passed in 1913, the job of the enrolled agent was expanded to include claims for monetary relief for citizens whose taxes had become inequitable. As tax collections became more complex, the role of the enrolled agent increased to include the preparation of the many tax forms that were required. And, as audits became more common, their role evolved to include taxpayer advocacy, negotiating with the IRS on behalf of their clients.
The move to extend tax preparer oversight to all commercial return preparers was begun in earnest when National Taxpayer Advocate Nina Olson recommended to Congress that all persons, other than attorneys, CPAs and enrolled agents, who prepare more than five federal tax returns for a fee, be required to register with the IRS.
All such persons would be required to pass an initial examination testing technical knowledge and competency to prepare individual or business tax returns, with annual refresher exams each succeeding year.
The recommendation was made a part of H.R. 1528, the Tax Administration Good Government Act, which has passed the Senate.
Although there is widespread agreement that many among the hundreds of thousands of unlicensed preparers are not qualified, the IRS is not pressing for additional responsibilities.
“It would take a lot of resources to do it properly, because you’re talking about hundreds of thousands of preparers,” said IRS Commissioner Mark Everson. “Some of the proposals talk about testing and re-certification and that would be quite manpower-intensive unless there was a fee arrangement, but it would certainly be an expansion of responsibilities.”
Les Shapiro, EA, president of Padgett Business Services Foundation and chair of the Washington-based National Association of Enrolled Agents Government Relations Committee, noted that only two states — California and Oregon — regulate commercial return preparers.
“The number of commercial preparers is not known with any accuracy, but estimates of upwards of 1 million individuals have been bandied about,” he stated before the IRS Oversight Board.
“Even if we had the numbers, we do not know the extent of training, if any, that many of the commercial preparers have had and the manner in which they keep abreast of the changes in tax laws and procedures,” he continued. “Perhaps of greatest concern is the belief that the public is not aware of the fact that many commercial preparers have no credentials.”
In fact, much of the public believes that return preparers are licensed or registered, according to Steinbis. “There’s an implied understanding the IRS is watching over these people anyway,” he said. “The minimum threshold for preparers doesn’t have to be at the enrolled agent level. That’s unrealistic, because some people just need a simple, individual return prepared. The IRS can set the standard, and then have someone else enforce the standard.”
The right for enrolled agents to call themselves enrolled agents, or EAs, varies from state to state despite their acceptance by the Treasury Department. “Enrolled” means they are licensed to practice by the federal government, while “agent” means they are authorized to appear in place of the taxpayer at the IRS.
A provision in S. 882 would specifically permit enrolled agents to use the designation “enrolled agent,” “EA,” or “E.A.,” and would supercede any state rules to the contrary.
“It’s overdue,” said Setauket, N.Y.-based Frank Degan, NAEA president-elect. “New York State Education Department rules still say it’s not allowed. North Carolina is the worst in not recognizing the credentials.”
“Use of the EA designation is legally proscribed in North Carolina,” said Sherrie King, a Raleigh, N.C.-based EA. “We can only call ourselves ‘accountants.’ We’re not allowed to use the EA, or to call ourselves ‘enrolled agents,’ or even to call ourselves ‘tax preparers.’”
Steinbis recalled that he received a “cease and desist” letter from California’s state board of accountancy soon after he opened his practice in the 1970s, even though he had graduated from San Jose State with a focus on accounting.
“It’s paradoxical that in California non-CPAs are not allowed to call themselves accountants,” said King, “but in North Carolina, non-CPAs can only call themselves accountants.”
Even without the legislative help, respect for the profession is growing in most areas, according to Steinbis. “The different bodies of the state boards
of accountancy are starting to recognize the abilities of enrolled agents. There’s a growing awareness of our ability to represent taxpayers, but this legislation will help.”
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