Preparer Licensing is Unpopular? | AccountingWEB

Preparer Licensing is Unpopular?

When unlicensed preparers step forward, upset about the new licensing requirements, I am not surprised.

Taking tests can be really scary. Especially if you haven't taken an exam in 20 or 30 years.

But really, folks, even your barber and manicurist have to take a test to be licensed. Some of them barely have a high school education and they pass their licensing tests. My husband is a school bus driver. Not only did he need to take a test to get licensed in the first place, he had to pass at least half a dozen tests. In fact, he faces re-testing every five years. He even has to spend time driving around with CHP officer for part of a day. And he is subject to being followed around on a random basis by supervisors and must face random drug tests.

No one is asking anything quite so difficult of tax preparers. IRS and the National Taxpayers Advocate simply want to protect the public and ensure that people who prepare their tax returns have enough familiarity with current tax laws to be able to do one properly.

Listen to some of the stories I heard, just today, from some tax pros at a meeting:

1) Her new client brought her a tax return where the previous tax preparer was depreciating a duplex over 30 years. The duplex was bought in 2005. Not only was using a 30 year life (how did he get that past any tax software????), he depreciated a full 50% of the property (the owner lived in one unit), without reducing the basis for land.

(We finally figured out that the loan was a 30 year loan and that must have been where he got 30 years. Either that, or sometime before the Tax Reform Act of 1986, there may have been a 30 year life. But....wasn't it 40?)

2) Another fellow was blithely filing an LLC as a C corporation for his client for the last three years. Each year, the client brought him the IRS letter disallowing the C corporation because the Form 8832 election was never made. He ignored it and kept on filing without preparing a response or a Form 8832. The client finally left him because she had a surprise balance due and he ignored her repeated requests to give her estimated vouchers, or to tell her how to make ES payments.

Do you really think these people should still be doing tax returns? 

For unsuspecting taxpayers?
For money?

Give me a break!

Then I hear that CPA firms have exhorted my Representative and another, along with 31 other Congressional Representatives to send a letter to Secretary of Treasury Tim Geithner to ease up on the new preparer regulations. Why? Because their staff will have to comply and get PTINs and pass the exam if they are working directly with clients.

What's the big deal? Are they afraid their staff won't be able to pass a simple exam? One that is rumored to be an open-book exam? 

Oh come on! If you're going to have your staff interviewing clients and entering their data into your tax software, shouldn't they understand what they are doing?

I started out, with my assistant, by limited her interaction to purely clerical activities, and to proofreading specific aspects of my tax returns. By doing that, she quickly caught on the relationships of certain numbers to certain forms and started asking good questions. Pretty soon, she was studying for the EA Exam - and passed it.

My point is, if you have non-Circular 230 staff working with clients, if they are paying attention, they will understand enough about tax preparation to knock out the new exam easily.

The costs per person? A pain, yes.

But not enough to break the firm.

And not enough to significantly increase prep fees.

Firms were delighted to pass on the cost of efiling when that first came around.

Now most tax software companies don't even charge for the service.

Besides, just think about this. If your staff persons have licenses, it may even puff up their egos a bit and they'll take even more pride in their work.

Remember, if they are working for your firm, they're pretty smart.

Don't deny them the right to get licensed.

Don't you think they are as good as your plumber or fumigator?



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Eva Rosenberg, MBA, EA, is the publisher of, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

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