The American Institute of Certified Public Accountants (AICPA), responding to questions from the Internal Revenue Service (IRS) on Notice 2009-60 relating to the agency’s review of tax return preparers, stressed that the IRS already has sufficient authority, without the need for new legislation, to regulate all federal tax return preparers through the current penalty structure, Circular 230. The AICPA letter also strongly advised against imposing duplicative regulatory processes on CPAs, attorneys, enrolled agents, and the other professionals already subject to Circular 230.
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In a letter addressed to Douglas Shulman, Commissioner IRS, Alan Einhorn, Chairman of the Tax Committee addressed general questions concerning regulation of tax return preparers, and regulation of differed groups of preparers. “We believe all tax return preparers should be regulated under Circular 230; that is, all tax return preparers should be regulated and subject to the same sanctions. Circular 230 provides ethical and professional standards that protect the taxpayer when that taxpayer retains a tax return preparer who practices before the IRS to prepare his tax returns. These standards should apply not only to an enumerated category of Circular 230 practitioners, but to all tax return preparers.”
No additional legislation or regulatory authority is required with respect to standards of practice for tax return preparers, the letter concluded. “Through the use of the current penalty regime combined with an expansion of the ability of the Office of Professional Responsibility to monitor currently unlicensed return preparers, the IRS has the authority necessary to regulate all federal tax return preparers.”
The AICPA also expressed support for an administrative rule calling for “the implementation of one unique identification number for all preparers (and all other tax practitioners) to track all interactions with the Service.” The Treasury Inspector General for Tax Administration (TIGTA) has recommended this procedure since 2006.
Michael McKenney, Assistant Inspector General for Audit, TIGTA, highlighted some of the problems the IRS faces in just identifying incompetent or unethical tax preparers, and called for the unique identification numbers in a written statement submitted at the Public Forum for the IRS Tax Return Preparer Review. Sample test results show that individual tax preparers used multiple numbers for returns prepared in the same year, he wrote. In addition, the IRS data gathering systems are “decentralized among more than 20 different IRS systems that are not integrated, and there currently are no data standards among these systems to easily match preparer information.”
Other questions from the IRS related to training, ethics, and firm responsibility for conduct and training. “Our members satisfy arduous educational, testing, licensing, and CPE requirements of the CPA profession and they conduct their practices within the quality and ethical standards articulated by the Office of Professional Responsibility, state boards of accountancy, the AICPA, and state CPA societies. . . . In our view,” Einhorn wrote, “CPAs are both sufficiently skilled and adequately overseen.”
In response to the IRS question, “Is there a minimum level of education and training necessary to provide tax return preparation services? If so, who should be responsible for ensuring that a tax return preparer meets this minimum level and how should that be done?,” the AICPA affirmed that while they strongly supported incorporating the notion of competency into the regulation of all tax preparers, “the education and training that should be expected of a preparer is return specific.”
The IRS also asked what specific behavior a code of ethics should promote or prohibit and how a code of ethics would interact with existing ethical standards.
The AICPA response referred to the Statements on Standards for Tax Services Nos. 1-8 (SSTS). “These enforceable tax practice standards are in many ways conceptually similar to the scope of the Circular 230 standards.”
“We strongly support the SSTS and Circular 230,” Einhorn wrote, “and we view these sets of enforceable standards as providing meaningful guidance to CPAs in performing their professional responsibilities with respect to tax services. As stated earlier in this submission, we believe the public would benefit from making all tax return preparers subject to Circular 230 and oversight by the IRS Office of Professional Responsibility.”
Firm responsibility – ethics
The IRS asked what if any responsibility a firm had for the conduct of the individual they employ. The AICPA said, “Ultimately it is the individual's responsibility to comply with professional and legal standards. However, firms... should require that employees satisfy the professional and legal standards imposed on federal tax return preparers, including compliance with practice standards sufficiently high so as to avoid employee exposure to penalties under sections 6694 and 6695.”
While stating that “We believe ultimately it is the individual’s responsibility to comply with professional and legal standards,” the AICPA strongly supports implementation of high professional standards for all tax practitioners comparable to the AICPA Code of Professional Conduct and the Statements on Standards for Tax Services.”