IRS Regulations with Oregon Twist

[Snaggletooth]

Most people on this board support the idea of our industry becoming regulated by the government. We know our industry is too fractious to regulate itself, and we are forever plagued with the likes of "Shifty-Eyed Sam" across town and other incompetent or poorly trained preparers.

Remember, we can see immediate benefits from regulation, but I really wonder whether another bureaucratic Frankenstein will be created. Ten years from now instead of whining about "Shifty-Eyed Sam" we may be even more incensed with "Bureaucrat Bob."

Proposed legislation has been discussed on the board before, and has been shuffling around Congress for 3-4 years. The last I heard was most members of Congress were in favor of regulation, most of the professional organizations (NATP, NAEA, etc.) were in favor of it as well.

And those in the IRS wish to use the "Oregon system" as a model for the entire nation. Veritas, Davc, & others, can you give us a birds-eye synopsis of just what we should expect if the "Oregon system" is adopted?

[veritas]

When Oregon

First started licensing, those that had been practicing were grandfathered in. So the only requirement for those individuals was ce required of 24 hours every year. Those that did not come in under those rules were required to attend class for 60 hours (now 80) and then take a test to be a licensed tax preparer. A. tax preparer can't operate a tax prep business. They must operate under a licensed tax consultant. A tax preparer must complete two tax seasons and take another test to be a consultant. Cpas and attorneys are not covered by these requirements, nor are their employees.

EAs' can take a test for Oregon tax law only and become licensed tax consultants. Our state ce requirements are now 30 hours per year.

We of course pay our state board licensing fees along with a license for our business location.

I like licensing since it eliminates my competition and allows us to charge more.

[Davc]

Nice summary.

I think one reason the Oregon system is thought of as a possible model is that it's been in place much longer than any other state licensing.

[veritas]

also

Our accuracy is the highest in the country after Maine.

[taxmandan]

And....

Our licensing laws do limit competition, and for awhile the national chains had trouble with the 'Resident Consultant' rule, which requires an Licensed Tax Consultant to be physically present in every office. There are few LTCs who don't own their office, so finding one to hire as an employee can be problematic for a multple office company. You can train a preparer and get them licensed as a Consultant, but then they go out on their own and make a whole lot more money than they can as an employee. And I've seen some very incompetent LTCs.

As for eliminating the "Shifty-Eyed Sam" up the street, the laws reduce the number of them, but they are still here. When the new laws are enacted, I would think theIRS would have to hire 10,000 enforcement agents just to chase down all the unlicensed preparers, a doubtful case IMHO.

But be sure, you'll be paying substantial renewal fees to maintain your national license AND hefty fees to meet CPE requirements. We already do: ~$20-40 per hour for 30 hours of CPE each year, and $155 for the license.

[DaveO]

I’m rather divided on the topic of regulation. I don’t like loosing business to the “guy down the street” that won’t question mileage or M&E deductions but on the other hand I see it as rent seeking behavior on our part. Hair stylists, taxi companies and florists all welcome regulation because it thins the ranks of their competition.

I also recognize that an efficient and fair tax system is a public good and therefore may be regulated to insure uniformity and quality. Problem is our tax system is neither fair nor efficient. The complexity of the tax system results in non-compliance through ignorance as well as design. The fault of this complexity as well as the ability to fix it rests with congress. Problem is congress can’t help but try to influence peoples purchasing and lifestyle decisions through the tax code.

Just in the case of “cash for clunkers” they are attempting to bend the demand curve while they are bending the supply curve with the takeover of GM. I’d be less worried if there was a little more real world business experience in government and a lot less social engineering theory.

[joanmcq]

with the constantly changing tax laws I cannot imagine someone trying to competently professionally prepare returns without taking CPE each year. If you cannot fit that into your budget, you should not be preparing returns. I am licensed, in OR & CA, and cannot fathom how you could be for anyone being able to hang out a shingle and call themselves my equal.

[abby]

My 2 cents

AND hefty fees to meet CPE requirements. , and $155 for the license.

The $155 covers the license and the business registration - I work in a CPA firm (in Vancouver, WA, but we have a lot of Oregon clients and the requirement affect us, too) and just maintain the license portion - which is $95. When I lived in Oregon I had to maintain the business registration portion as well in order to prepare any returns outside my employment.
CPAs and Attorneys are exempt from the licensing and the rules about having an LTC on site, but some prefer to hire non-CPA/Attny employees that have received their licenses.

I don't think I would have stumbled into this profession if I hadn't been in Oregon; having a clear path to gather the knowledge I needed, with benchmark testing to have some proof I was on the right track, was helpful to me. I got my LTP license, then the LTC and then my EA.

[iratax]

Some of the factors that make the Oregon licensing work so well may not be carried over into the Federal laws.

The failure rate on the test is over 50%. I don't think the federal testing will be nearly as difficult as Oregon's. When tax preparers work so hard for their license in Oregon that don't take risks that will jeopardize their license lightly.

Oregon has an extremely active enforcement program with very high penalties for even minor violations and that also helps to reduce violations. The Board of Tax Practitioners which enforces the program gets its funding from fines it collects.

[AuditorTurnedGood]

let's not generalize.

I am licensed, in OR & CA, and cannot fathom how you could be for anyone being able to hang out a shingle and call themselves my equal.

As an unlicensed shingle hanger, I may not be equal, but I am good at what I do. Not all preparers without licenses are preparing bad returns, just as not all preparers with EAs, CPAs, etc, are the be-all-end-all of tax services. Licensed or not, there are bad apples in both barrels.

P.S. I am getting ready to sit for the CPA, and am for requiring licensure, I just don't think it's going to do much good.

ATG

[joanmcq]

Hey ATG, no offense meant. The people on here are generally trying to keep up with tax law and care about what they do. But so many of them don't. Or, if not required, and you were 'having a bad year' or had a few extra bills to pay, or just wanted that vacation at the beach rather than at a tax conference, might skip the CPE. So licensing puts a minimum requirement...you've got to at least sit through a seminar, or wade through an online course for a few hours a year.

[DonPriebe]

Meanwhile on the East Coast

New York will be licensing tax preparers starting in January 2010. The basic concepts were included in the budget this year, but the details and procedures have yet to be issued by the Dept of Taxation.

Initial requirements to be a licensed tax preparer ... pay a fee of $100 per year. Volunteers and preparers preparing less than 10 NY returns are exempt from the fee.

Training, education, testing, CPE, etc. to be defined at a later date after a study by a committee to be appointed.

[BHoffman]

Speaking of seminars

Has anyone attended a "Gear Up" seminar? I'm signed up for one next month and hope it's interesting because it begins at 7AM, and my heart doesn't even start beating until around 9.

I have to spend around $1,000 per year for licensing requirements. CPE, Peer Reviews, License fees. Just another cost of doing business.

[AuditorTurnedGood]

None taken, joanmcq - I'm told I'm easily provoked.

I agree - there are a lot of people who don't do CPE and we all need to. I'm reminded of a college professor who continually referred to "the big 12" (this was shortly after the Big 5 had become the Big 4 with the demise of Anderson) and his time at Cooper Lybrand (now PriceWaterhouseCoopers, has been for about 2 decades). He didn't keep up with the changing landscape, and we were all left wondering just how much we were being taught about fraud detection.

As for GearUp, I did it last year. There was some good information, and the speakers weren't half bad. Problem is, there was so much new tax law in late Q3 and Q4 last year that the material was pretty much out of date by the time it rolled off the press. And yes, 7AM is brutal - I think we started at 8.

ATG

[Davc]

In OR OAIA used to sponsor GearUp and I attended at least the 1040 Fall update for years. The last time I went I decided to switch to another fall seminar However, OAIA decide to switch to Bob Jennings so I went to that last year. I don't consider GU to be nearly as good as they used to be for several reasons.