Preparers hopeful but wary of new efforts to regulate prep
Tax professionals hate the crooks in their profession and want them regulated and weeded out. The question is, how? And how effective will the latest attempts by politicos be?
Sen. Ron Wyden, D-Oregon, and Ben Cardin, D-Maryland, have introduced legislation to require minimum standards for paid preparers and to rescind the PTINs of incompetent and fraudulent practitioners.
“I’m in favor,” said Mary Kay Foss, a CPA in Walnut Creek, California. “It’s offensive when you’re a professional trying your best to do the most complete and accurate job possible and you hear of someone doing a crummy job and giving the others a bad name.”
Debra L. James, an Enrolled Agent at Genesis Accounting & Management Services in Lorain, Ohio, said, “I cannot think of one logical reason why any ethical and law-abiding practitioner would oppose this. I’m disgusted by some of the unethical things I see unregulated preparers do, and how easily they convince taxpayers that what they do is right,” she said.
“Anything to get rid of the bottom dwellers in the preparation industry,” said Chris Hardy, an EA and managing director at Georgia-based Paramount Tax and Accounting. “I’m not one for more regulation, but there is so much scam in this industry that we need more regulation.”
The Taxpayer Protection and Preparer Proficiency Act of 2019 would give the Treasury and the Internal Revenue Service the authority to set federal standards of tax practice for all paid preparers. It would also require certain preparers to meet minimum competency requirements, including obtaining a PTIN, satisfying examination and annual continuing education requirements and completing a background check.
“It’s imperative that preparers and tax professionals are licensed,” said Helen O’Planick, an EA at HELJAN Associates in Manchester, Pennsylvania. “We see too much bad stuff out there, and it’s not only hurting our profession, it’s hurting the taxpayer.”
“Long overdue,” said John Dundon, an EA at Taxpayer Advocacy Services in Englewood, Colorado. “Surprised it’s not a bipartisan effort. Lobbyists for the big-box chains will undoubtedly get it watered down to the point that it becomes marginally effective.”
“Excellent idea that should’ve been implemented years and years ago,” said EA Terri Ryman of Southwest Tax & Accounting in Elkhart, Kansas. “Seeing as this is the major source of income for the United States to operate, I would hope that we’d have competent folks preparing returns.”
CPAs, EAs and tax attorneys have long been subject to competency and continuing education requirements, but much of the tax prep industry has been unregulated except in a few states. The IRS launched its Registered Tax Return Preparer program nine years ago that imposed similar requirements on preparers. Following a lawsuit from a group of independent preparers, a federal court judge ruled in favor of the preparers in 2013, invalidating the RTRP program and saying it exceeded the IRS’s statutory authority.
‘Better than nothing’
“The only concern I have is the regulations discerning between errors and intent to commit fraud,” James said. “Making a mistake does not constitute a crime, and penalties imposed on otherwise ethical practitioners only serves to make us afraid to do our jobs for fear of making a mistake.”
“Good idea in theory, but may be difficult to implement,” added Bill Smith, Bethesda, Maryland-based managing director for the National Tax Office of Top 100 Firm CBIZ MHM. “Many preparers are either attorneys, CPAs … or Enrolled Agents, all of whom have their own testing and CPE requirements. So they’ll essentially be unaffected. The legislation seems to target the seasonal preparers who are more likely to bend or break the rules. The more you can get [seasonal] preparers to achieve established levels of education and avoid negligent or intentional wrong reporting positions, the better off the industry.”
“I don’t know that the ability to rescind PTINs will add much to the powers the IRS already has to censure, suspend, disbar or otherwise discipline under Circular 230, particularly if there has to be an initial determination that the preparer is ‘incompetent or disreputable,’” Smith said. “But this portion of the industry is so under-regulated that almost anything is better than nothing.”
Admittedly, Foss added, “It’s difficult to come up with standards that will not cause lots of criticism from all sides. CPAs will show that we’re a regulated industry with CPE standards for education and ethics so we should be exempted. Enrolled agents will have a similar argument for the reason they should be exempt. California registers tax preparers that do not have an EA or CPA credential, and based on that achievement, they’ll expect exemption. In some areas, attorneys prepare tax returns and will want an exemption as well. Some financial advisors prepare returns and comply with federal or state regulations. National chains of tax preparers have standards and training programs and will also argue that they deserve exemption.”
The other issue: increasingly complex tax laws. “In the past, some organization presented the same fact pattern to tax preparers in the categories mentioned and found that none of them got the exact same tax liability,” Foss said. “Even though none of them was clearly wrong, it’s both an art and a science to interpret the facts and the current laws.”