Enrolled Agents Entering the 21st Century

More than 10,500 individuals have registered to take all or part of the new Special Enrollment Examination (SEE) during the session which began on October 5, 2006. And registrations keep coming in.

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This is not the first time the SEE, the exam which qualifies tax preparers as Enrolled Agents (EA) with the privilege to practice before the Internal Revenue Service (IRS), has been given in October. It is, however, the first time it has been given in an electronic format, or at nearly 300 Thomson Prometric testing centers nationwide.

The SEE is not the same endurance test it used to be. Many of the changes were made to make the test more convenient for candidates. They can now take each part of the test separately. In addition to being available at multiple testing centers, candidates will be able to take the exam during several testing periods throughout the year, rather than the single fall testing period used in previous years. Beginning in May 2007, candidates will also receive their scores before they leave the testing center instead of having to wait several months to discover whether they passed or failed. A second testing period has already been scheduled for January 2 to February 28, 2007. A third testing period will begin May 1, 2007, and the examinations will be offered continuously through February 28, 2008.

Not all of the changes were solely for the sake of convenience. Many changes were made in the content of the test so that it is a better reflection of the skills and knowledge Enrolled Agents use in their careers representing taxpayers in a variety of matters before the IRS. To accomplish this, the IRS turned to Thomson Prometric “the leading global provide [sic] of comprehensive testing and assessment services”. From its beginnings as Drake Prometric, when it developed a computerized exam for Novell, through the acquisition by Sylvan in 1997, to the acquisition by the Thomson Corporation in 2000, the company has continued to provide test development, test delivery and data management to clients in the academic, professional, government, corporate and information technology sectors. Thomson Prometric is a division of the Thomson Corporation, which provides integrated information solutions to business and professional clients and last year reported revenues of approximately $8.40 billion.

In more recent news, Thompson Corporation on Thursday reported third quarter earnings of 65 cents a share, surpassing the 47 cents per share of a year ago, as well as analysts’ forecasted 57 cents per share. News of $309 million in profits during the third quarter came a day after the company announced the sale of Thomson Learning and NETg, according to CBC News. The company also began the competitive bidding process for Thomson Prometric. This means that Thomson is currently seeking buyers for the division. The impact such a sale would have on the SEE was unknown at the time of this writing.

Thomson Prometric turned to the National Association of Enrolled Agents (NAEA) for assistance in determining the appropriate topics for the test. NAEA subject matter experts also helped to develop questions for the examination. Although copies of past SEE testing booklets are available online at the IRS website, it is unknown how much benefit will be had from studying them, given that the test has been completely redesigned. The IRS Enrolled Agent Special Enrollment Examination Licensing Information Bulletin issued by Thomson Prometric suggests candidates refer to Internal Revenue Code, Circular 230 and IRS publications.

The effort to make the SEE more relevant and convenient is just one aspect of the ongoing discussion regarding the need to license all tax preparers. The new SEE is being administered even as such companies as H&R Block seek tax season employees and organizations such as the American Association of Retired Persons (AARP) seek volunteers to help members prepare their tax returns.

In another facet of the tax preparer training debate, legislation is moving through Congress in the form of Senate Bill 832, introduced by Senator Jeff Bingman (D-NM) in April 2005, and incorporated into Senate Bill 1321 in June 2006. The bill would regulate paid tax preparers.

“Tax industry people ‘in the know’ say tax preparer regulation is imminent,” Charles E. McCabe, President of Peoples Income Tax, Inc., said in a prepared statement.

McCabe’s organization introduced the Chartered Tax Professional (CTP) certification program in late September through its education division, The Income Tax School. Certification Board of prominent tax industry leaders and educators provides oversight of curriculum quality, practices and standards for the CTP certificate program. The CTP program is endorsed by the National Alliance of Tax Business Owners (NATBO), according to a statement from the Income Tax School.

Rather than setting the CTP up as an alternative to the EA, individuals earning the CTP will be encouraged to prepare for and take the IRS Enrolled Agent exam and become EAs. McCabe does, however, plan to petition the IRS to exempt CTPs from the competency test that would be required by the legislation proposed in S. 832 to regulate tax preparers, saying: “the current legislation would exempt EAs, CPAs and attorneys; however, those who have earned the CTP will have equivalent or greater tax knowledge than the majority of these professionals, and they will have passed comprehensive exams for each of the six certificate program tax preparation courses.”

At the present time, the ability of unenrolled preparers to practice before the IRS is limited to the examination function with respect to a return prepared by them. This means unenrolled preparers cannot practice before appeals officers, revenue officers, and Counsel, nor can they execute claims for refund, receive refund checks, execute consents to extend the statutory assessment or collection, execute closing agreements or execute waivers of restriction on assessment or collection of a deficiency in tax.

The advantages of the EA designation are significant for anyone preparing taxes professionally. In addition to being able to practice with very few limitations before the IRS, the EA demonstrates to both clients and peers that an individual has demonstraed a high degree of competence in tax matters. At a time when the competency of tax preparers is a debatable question, that assurance is probably the greatest advantage of all.

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