CPA state licensing ethical questions

[dkss]

I noticed several years ago (2009) that the local CPA's license was showing expired on the state licensing website. I ran into him shortly thereafter and mentioned it to him, just a friendly reminder. He admitted he forgot and said he just "needed to throw some money at them." I just checked today and see that his license is still showing expired since 2009. He has continued to identify himself as a CPA. BTW, I am not a CPA and this is a man that I would refer corporation business, since I don't handle corps or partnerships.

Questions:
1. Can he still identify himself as a CPA when his license is expired?
2. Are CPA's with expired licenses exempt from testing for the RTRP exam?
3. Is he still able to do full audit representation on an expired license?
4. Would you report him to the state accountancy board or keep your mouth shut?

Thanks for your insight,
Debbie

[Uncle Sam]

CPA state licensing

Questions:
1. Can he still identify himself as a CPA when his license is expired?
He's not supposed to - depending on what his state's rules are.

2. Are CPA's with expired licenses exempt from testing for the RTRP exam?
no

3. Is he still able to do full audit representation on an expired license?
Audit representation - is that income tax audit representation? Under Circular 230 if
a person's CPA license is expired - they're not supposed to.

4. Would you report him to the state accountancy board or keep your mouth shut?
Unless you have direct involvement in an issue with him - I would keep quiet.
You're not the police.

Anyway - Why are you so concerned regarding his status? You mentioned it once.
If you mention it again to him he'll distrust you because he'll know you're checking up on
him.

Thanks for your insight,

[JohnH]

I agree with Uncle Sam. Nothing is forcing you to refer people to him if you have reservations about his professional status. As a matter of fact, I think you have an obligation not to refer people to him at this time.

Beyond that, you have no involvement in whatever may be going on between him and the CPA licensing board. They have his address and they know his license is expired, as evidenced by the web site info (assuming it's accurate, up-to-date, and there aren't any name similarities or other bureaucratic mis-steps involved)

[AZ-Tax]

Debbie, I had somewhat of a similar situation yrs ago

I just checked today and see that his license is still showing expired since 2009. He has continued to identify himself as a CPA. BTW, I am not a CPA and this is a man that I would refer corporation business, since I don't handle corps or partnerships. Debbie

I had a similar situation except I didn’t refer nor would have I sent this self-proclaimed CPA any business. The only ads I run is in 2 Catholic bulletins in 2 parishes each 5 mi from me in opposite directions. I am a parishioner of one of them. I had the only tax prep ad in my parish bulletin from 2004 thru 2008 then in early January 2008, competitors ad appeared and his ad said CPA. Well I decided to check the AZ board of accountancy website and could not locate his name. I emailed the board under my cognito email address inquiring if I was searching their database incorrectly because I could not locate such a person (gave her his full name and address). A lady from the AZ board replied back that he was not a CPA, asked me where I saw that he was a CPA and requested that I email her the ad. I hesitated for a few days before speaking to my spouse. She was reluctant too but said he is misleading our parishioners in a Catholic bulletin. I spoke to someone higher up in my parish and they suggested that I email his ad to the AZ board for which I did. 2 weeks later his ad no longer displayed CPA. 1 yr later his ad no longer appeared in the bulletin. Come to find out the company who handles that ad for which they sell thousands of ads in parish bulletins across the U.S., do NO due diligence which is understandable but the parish can request to have any ad cancelled from their bulletin. The higher ups were thankful I reported on him vs. the parish for he would have known immediately it was the parish that reported him and probably have animosity towards the parish. Just like politics, go figure! I have caught quite a few people in the bulletin with ads stating they are a parishioner and find out they are not.

[Koss]

Cautionary Tale

The "expired" CPA referred to in the original post may be very competent. If most or all of his practice is tax return preparation, he might be weighing his options, in the sense that maybe he wants to give up the CPA license and become an RTRP.

Some CPAs might think that's really crazy, or stupid. But if he's an older fellow who thinks of himself as semi-retired, it might make sense. The annual cost and regulatory baggage of an RTRP will be lot less than a CPA.

With that being said, dkss has a bit of an ethical dilemma with respect to those clients that he already referred to the guy, particularly if he has an ongoing business, or even personal relationship with those clients. He may feel a moral obligation to notify them that the guy is no longer licensed.

Right now, if he consciously chooses to allow his CPA license to lapse into an invalid status, he arguably has a provisional PTIN, i.e., he becomes an unenrolled preparer who is subject to IRS continuing education requirements, and must pass the test by the end of 2013. On this reasoning, it is not a violation of Cir. 230 for him to continue to prepare tax returns.

But it raises all kinds of other questions if his clients don't know that his status has changed. And it is definitely improper for him to hold himself out as a CPA.

And what about his EFIN? If he's no longer a CPA, he'll need to be fingerprinted. IRS e-file rules require him to notify the IRS that his professional license is no longer active.

I'm not sure I agree with the "mind your own business, don't get involved" approach.

I am currently working with a client who had a complex Schedule C return prepared for many years by a CPA. The guy's license was revoked back in 2002, but he continued to do tax returns, and didn't tell my client that he was no longer a CPA. Back then, of course, it didn't matter. You didn't even have to have a PTIN. He might have been violating some state consumer protection rules or something, but he wasn't violating Circular 230 regulations by continuing to do the returns.

Then the client got audited, and it expanded to three years, and the results were horrendous. This guy should not have been doing income tax returns. Whether there were any regulatory violations is unclear; if there were, they were probably at the state level, not at the IRS level. But the client probably would have gone elsewhere if he had known that the guy's license was revoked. Especially if he had known why it was revoked. I'm not going to provide more detail, because it could lead to the identification of my client.

The fact pattern in the original post is certainly very different, as it does not appear to involve a revocation.

But it still raises moral and ethical questions. It's one thing to miss a due date, and renew your license a few weeks or even a couple months late. At some point, it has simply gone too far, and the guy just can't keep identifying himself as a CPA. At some point, it should be reported. Whether that point has been reached is an individual judgment call.

BMK

[taxea]

Sorry gang but I suspect you expect this from me. If he is advertising as a CPA whether in marketing ads, on his signs, etc I say report him. If you can't bring yourself to do it then send the info to me, I will report him without outting you.

[LCP]

Here is how Michigan handles it according to the MACPA ........

Registered Only vs. Active License
A CPA is considered to be in "Registered Only" status in the state of Michigan if the individual still holds a CPA certificate, but does not maintain an active license by completing the yearly continuing education requirement as mandated by Michigan law. It is okay for an individual to use the CPA designation while in "Registered Only" status, as long as they do not hold themselves out as practicing public accounting to the public. While in "Registered Only" status, the individual:

Can use the CPA credential on their business card,
Prepare and sign a tax return, but cannot use the CPA designation
Cannot provide public attestation (including auditing) opinions on financial statements

[Koss]

Registered vs. Active

That's interesting information.

And I suppose the Michigan Accountancy Board can establish whatever categories they want. But I think the IRS might see things differently, at least under new regulations.

If they are not in an active status, and cannot use the CPA designation, then they are not exempt from the testing and continuing education requirements. They would need to become an RTRP.

The fact that Michigan somehow allows them sign a tax return without really being a CPA somehow leaves me unconvinced. That rule in Michigan probably hasn't been updated in many years. It is probably meant to clarify that a person who chooses the "registered only" status is not engaging in the practice of accountancy by preparing tax returns.

The IRS exempts CPAs from the RTRP requirements because they are subject to continuing education requirements under the CPA regulations of the state. Once you strip away those requirements, and make it clear that they are no longer a CPA (since they can't use the CPA designation and can't do audit and attestation), then the IRS is no longer going to recognize them as exempt from the RTRP rules.

BMK