[IMGCAP(1)]After the Internal Revenue Services’s mandatory Registered Tax Return Preparer licensure program was shut down by the courts in Loving v. IRS, the service suggested that it might institute a voluntary tax preparer credential program.
Instead IRS Commissioner John Koskinen has announced a new voluntary program supposedly “designed to encourage education and filing season readiness” called “the Annual Filing Season Program.”
This program does not issue to those who meet its requirements an actual identifiable credential or designation, like “Registered Tax Return Preparer.” Instead, those who qualify will be issued a “record of completion” and be added to an IRS public database of what was initially identified as “approved preparers.”
The IRS release “New IRS Filing Season Program Unveiled for Tax Return Preparers” (IR-2014-75 dated June 26, 2014) outlines the requirements for receiving a “record of completion.”
There are so many things wrong with this new program. Let me count the ways.
1. As previously stated, the program does not provide those who meet the requirements with an identifiable credential or designation, with accompanying initials, like “Registered Tax Return Preparer” (i.e., John Q. Preparer, RTRP) that the recipient can use in advertising and promotion to identify their competence and currency in 1040 preparation. Those who pass the test and take the CPE are merely placed on a list of IRS recommended preparers and given a plaque to hang in their office.
If the IRS really wants to help the taxpayer public identify competent tax preparers, who have been tested and remain current, it must provide a method of publicly identifying them such as an actual credential.
The main purpose of a tax preparer certification program is to recognize proven educated, experienced, competent and up-to-date tax professionals via the “awarding” of an actual credential as is done with Enrolled Agents.
2. The program does not call for an initial competency test. Instead, participants must pass an annual “comprehension test” upon completion of the required six-hour “federal tax filing season refresher course.”
There should be one initial competency test. While it can be administered by individual CPE providers, as was suggested in the original proposal, it must be a universal test written by the IRS. Unlike the basic open-book test of the mandatory RTRP licensure program, the test should be more detailed and comprehensive. Participants should not be required to pass an additional test each and every year thereafter.
CPAs and attorneys who want to identify their competence and currency in 1040 preparation should be allowed to apply for the new designation and be able to display the new initials (i.e., John Q. Preparer, CPA, RTRP). In order to be awarded the new designation, and accompanying initials, CPAs and attorneys must have to meet the same competency test and annual CPE in taxation requirements as any other applicant.
3. The public database, if it will actually be used by a material number of taxpayers seeking professionals, could be large and confusing if it is merely an alphabetic listing of all “record of completion” preparers mixed in with others of “recognized credentials,” some which nothing to do with 1040 preparation, and “higher levels of qualification and practice rights.”
To be done correctly, the database should contain all PTIN-holders, since all individuals who have a valid PTIN are "approved preparers," listed alphabetically by category of designation. Instead of one big list, there should be separate lists for Enrolled Agents, recipients of the new voluntary designation (perhaps Registered Tax Return Preparer), unenrolled preparers, CPAs, attorneys, ERPAs, and enrolled actuaries.
The database should be prefaced with a statement that only Enrolled Agents and those holding the new voluntary designation have demonstrated competence and currency in 1040 preparation via testing and mandatory CPE in taxation.
4. Those who receive the new voluntary designation will not be allowed to “practice” before the Internal Revenue Service. Only “attorneys, CPAs, and Enrolled Agents will continue to have unlimited representation rights.” Loving v IRS told us that “preparation” is not “practice.”
So those who are awarded the new voluntary tax preparer designation should not be subject to any additional “duties and restrictions relating to practice before the IRS.”
5. The new program should not be allowed to deny unenrolled tax preparers who chose not to participate the right to represent their clients before the service during an examination of a return that they have prepared and signed. All tax preparers with a valid PTIN must have the right to defend or explain, or assist their clients in defending or explaining, the tax returns they have personally prepared during the audit process.
I previously explained how a new voluntary IRS tax preparer designation should work in “What the IRS Should Do About the RTRP”, and I explained the best way to offer a voluntary tax return preparer designation program in “It’s Time for Independent Certification for Tax Preparers”.
The announcement of the “Annual Filing Season Program” is a clear indication that the IRS should not be the organization to offer and maintain a voluntary tax preparer designation. Unless it is substantially revised along the lines I have discussed above, unenrolled preparers should refuse en masse to participate in this new program.
Robert D. Flach has been a tax preparer since 1972 and blogs as The Wandering Tax Pro, as well as writing on taxes for MainStreet.com.