The American Institute of CPAs told Internal Revenue Service officials that it supports the agency's plan for mandatory preparer tax identification numbers and stricter ethics requirements, but it objects to the education and testing elements of the IRS's tax preparer regulation proposals.
At an IRS hearing last month, Patricia Thompson, vice chair of the AICPA's Tax Executive Committee, acknowledged that a unique identification number for all paid preparers of U.S. tax returns and a requirement that subjects them to the same penalties and ethics standards that now apply to CPAs, attorneys and enrolled agents are effective ways for the agency to meet its goal of improving the competence and ethics of paid tax return preparers.
However, she noted the AICPA's opposition to the education and testing elements of the IRS proposal, as well as concerns about requiring the employees of CPA firms who do not sign tax returns to get an ID number.
"The IRS needs a useful way to identify and track tax preparers who have high error rates or are engaging in fraud," she said. "Requiring all tax preparers to use a unique ID number should provide big administrative gains for the IRS and help protect taxpayers."
Thompson told the IRS that taxpayers must not be confused by the name used to describe tax return preparers who have a preparer tax identification number, or PTIN, but are not CPAs, attorneys or enrolled agents. "Taxpayers need to be able to distinguish between the professional capabilities and education of the different groups of tax preparers," she said.
The proposed regulations would start to implement a plan that the IRS released in January to register and assign a preparer tax identification number to all paid tax preparers who will file tax returns in 2011. The IRS expects to begin registering tax return preparers in September.
Thompson said that the AICPA opposes the provision in the proposed regulations requiring employees of CPA firms who help prepare tax returns, but do not sign returns, to get a unique ID number. "PTINs are not necessary for non-signing preparers in CPA firms," she said.
"Tax returns prepared in CPA firms are generally reviewed and signed by a CPA, who is responsible for the overall accuracy of the return under both the Internal Revenue Code's preparer penalty provisions and the CPA profession's ethics rules," Thompson added. "The IRS should be able to contact the signing preparers who have the records of who in the firm worked on a particular return."
She said that taxpayers are further protected when a CPA prepares their tax returns because both CPAs and CPA firms must register with their state boards of accountancy, which subjects CPA firms and their employees to the state's ethical and competency rules.
The fee for obtaining a PTIN needs to be reasonable, Thompson said. "The amount of the user fee should cover only the cost of issuing the PTIN; we do not believe the fee should be used to generate surplus revenues or pay for increased staff to manage the various aspects of preparer regulation."
While the proposed PTIN regulations do not address the education and testing requirements that are another part of the IRS's plan, Thompson said that any new IRS examination process should be delayed.
"The AICPA believes that successful implementation of the new PTIN registration process, coupled with making all preparers subject to penalties and Circular 230 ethics standards, should be sufficient to address problems with unethical and incompetent tax return preparers," she said.
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