By David M. Reape, CPA, Ciuni & Panichi Inc.
Despite heavy opposition from OSCPA and the AICPA, the IRS is moving ahead quickly with plans for its burdensome new tax preparer registration program.
Beginning in mid -September, any individual who prepares all or substantially all of a return for compensation—even if they don’t sign the return—will be required to register with the IRS and obtain a “preparer tax identification number,” or PTIN. This means a CPA firm’s unlicensed staff accountants, and even interns, will be subject to the registration and fee requirements.
And eventually, preparers will also need to pass an exam to prove competency and obtain 15 hours of CPE each year.
So far, CPAs will be exempt from the education and testing requirements, but employees who prepare returns under the supervision of CPAs or other preparers would not be.
The plan would also extend the Circular 230 ethics rules to all paid preparers, not just CPAs.
The IRS claims the new program will greatly reduce fraud and boost accuracy and compliance across the industry, but hasn’t yet demonstrated how this will be accomplished.
That’s largely because the IRS hasn’t defined what the testing and education standards will be or what will happen if someone fails to meet competency requirements.
As a member of OSCPA’s Task Force on Standards for Tax Preparers, I am angry and concerned that the IRS is putting the cart before the horse on this mandate.
Since the new plan was first announced in January, OSCPA has sent several comment letters to the IRS and asked Ohio’s Congressional delegation for help in slowing down this rush to regulate. Several Ohio members of Congress have been very supportive of our efforts, but the IRS steamroller appears to be moving forward anyhow.
While the premise behind the new registration program is sound—curbing abuse and making all tax preparers more competent—the implementation will add a costly layer of administration for ethical and competent preparers such as CPAs and their associates.
Specifically, the IRS is requiring registration of all preparers immediately and at a cost of $64.25 per person the first year—a hefty fee for a still largely undefined program. Could the need to find new revenue sources have as much or more to do with this new fee on CPAs and others than the ability to improve compliance?
A fee-laden mandate that increases administration doesn’t translate to increased tax compliance. But it could create false expectations and confidence among taxpayers that preparers are skilled and ethical, and therefore less likely to commit fraud.
But where is the real oversight?
A better solution would be a major public education initiative that teaches taxpayers how to choose a qualified tax preparer. This might help to address some of the larger compliance and fraud issues surrounding the Earned Income Tax Credit (EITC) and Refund Anticipation Loans.
Longer term, serious consideration should be given to simplifying the tax code. This would do much to ease the compliance burden for taxpayers and increase preparer accuracy.
OSCPA and the AICPA are urging the IRS to act slowly and more thoughtfully in implementing the proposed new registration system.
If you agree, please add your voice to the conversation and ask the IRS to think before it mandates.
Send your comments to the IRS by e-mail at *firstname.lastname@example.org. (Please note: The asterisk is a required character in the e-mail address.) Click here for suggested message points to include in your e-mail.