Fly on the Wall at the IRS Return Preparer Office

[Koss]

The PTIN system appears to be back up and running. When the decision in Loving v. Internal Revenue Service came down, the IRS apparently believed that because the injunction prohibits the enforcement of "the new regulatory scheme for registered tax return preparers," that they were unable to even require preparers to obtain and use a PTIN.

In seeking a stay of the injunction, the IRS argued that all of the revenue collected from PTIN fees was in jeopardy. The plaintiffs pointed out that they never challenged the PTIN system or the fees. In denying the stay, the judge clarified that his order only prohibits the IRS from requiring testing and continuing education in order for a person to obtain or renew a PTIN. It appears that the IRS is not even prohibited from offering the RTRP exam. They simply cannot require anyone to take the exam, or pay for the exam, as a condition of obtaining or renewing a PTIN.

The National Association of Tax Professionals published a news alert this morning:

http://sgaweb.net/cbllc/natp_130201.pdf

It appears that the IRS and their lawyers at the Department of Justice simply interpreted the injunction way too broadly. They panicked, and took the entire PTIN system offline. They do in fact have to modify the PTIN platform, so that when an unenrolled preparer goes in to obtain or renew a PTIN, they are not presented with a screen that asks them to verify their CE hours, and a screen that says they have to pass the test by 12/31/2013.

But in arguing for a stay of the injunction, the manner in which the IRS failed to distinguish between the PTIN requirements and the testing and CE requirements really makes them look pretty silly. For those that are interested, links to the IRS motion for a stay, and the plaintiffs' memo in opposition, are in my earlier post:

http://forum.thetaxbook.com/showthread.php?21302

It sure would have been fun to listen in on the discussion that took place at the IRS Return Preparer Office right after the decision was announced.

Any movie buffs among us?

It might have gone something like this:

- - -

RPO Director: What are we going to do about the PTIN website? And all the RTRPs who have already passed the test? And what about those who have registered and paid for the test, but haven’t taken it yet?? There are people taking the RTRP exam right now!

Network Administrator: We got seven canisters of CN-20. I say we roll them in there and nerve gas the whole f*****g nest.

DOJ Attorney: That’s worth a try, but we don’t even know if it’s gonna affect 'em.

Admin Asst: Let’s just bug out and call it even, man! What are we even talking about this for?!?

IT Director: I say we take off and nuke the entire site… It’s the only way to be sure.

Admin Asst: F****n’ A!

RPO Director: Hold on a second... This installation has a substantial dollar value attached to it.

IT Director: (chuckling) They can bill me!

RPO Director: Okay... This is an emotional moment for all of us. I know that. But let’s not make snap judgments, please. This is clearly an important species we’re dealing with, and I don’t think you, or I, or anybody, has the right to arbitrarily exterminate them.

IT Director: Wrong!

Network Administrator: Yeah. Watch us!

Admin Asst: Maybe you haven’t been keepin' up on current events, but we just got our a***s kicked, Pal!

RPO Director: Look, I’m not blind to what’s going on, but I cannot authorize that kind of action. I’m sorry.

- - -

Disclaimer: The dialog above is a parody. With the exception of the character names and the first line, the entire dialog is taken verbatim from the script of the film Aliens (1986, Directed by James Cameron).

BMK

[Uncle Sam]

And I assume the names have been changed to protect the guilty.

[Koss]

Preparer Regulation

Just to set the record straight...

I find the Loving case to be very interesting for many reasons. Among other things, I find it encouraging that a federal judge has the b***s to put a stop to an illegal body of regulations that was imposed by an agency with a very poor record of treating citizens fairly.

I support some form of regulation for all tax return preparers. I do not support regulations that exceed the statutory scope of the agency's authority. And I am not convinced that the regulatory scheme developed by the IRS is the best or the most cost effective.

There is plenty of room for differing opinions on this matter.

Bees Knees makes a rational argument that if the IRS has the authority to require all preparers to obtain a PTIN, then they also have the authority to establish conditions that must be met in order to be eligible for a PTIN.

I respectfully disagree with this argument. I'm not going to go into the reasons. At the end of the day, neither my opinion nor Bees' opinion really matters. Right now, the only opinion that matters is that of Judge Boasberg. If he is overruled by the appeals court, then that opinion will become the one that matters. If his opinion stands, then the solution is for Congress to pass a new law to regulate tax return preparers.

I was an unenrolled preparer for almost twenty years. I became an enrolled agent in 2008, shortly before the IRS began to develop the new regulatory scheme.

BMK

[Uncle Sam]

Fly on the Wall

So I guess, Koss, that you'd prefer to see unlicensed tax preparers around abusing the competitive advantage they
have of no licensing requirements, CE requirements, liability insurance and other overhead costs that licensed professionals have to incur.
The original premise for PTINs was to protect the identity theft of preparers from having to disclose their personal
Social Security number - had nothing to do with RTRP or licensing issues. By letting these unlicensed and unregulated
preparers do as they wish - it's going to diminish the value of the EA license you worked hard to earn.
So your attitude is going to help in the process of your professional demise being too wise for your own good.

[Koss]

Preparer Regulation

As I said in my previous post, I am in favor of some form of regulation for all tax return preparers.

But if the IRS does not have the statutory authority to impose such regulations, then Congress needs to change the law.

The IRS is no different than any other executive agency, like the SEC, the FDA, or the FTC.

If Congress has not delegated the proper authority, then they cannot implement the regulations. The judge's opinion acknowledges that this is not about whether preparer regulation is good public policy. It's about whether the IRS has the power to do this.

BMK

[DexEA]

Just because someone has some initials behind their name and is "required" to take CEU doesn't make them any better than an unenrolled preparer with no initials behind their name. I've been to plenty of CEU seminars that people have come into class, signed in and are gone before lunch. I guess they must have known everything already so reason to stick around - but I bet they didn't reduce the credits needed for the time skipped. There is good and bad in all walks of life.

[taxea]

Just because someone has some initials behind their name and is "required" to take CEU doesn't make them any better than an unenrolled preparer with no initials behind their name. I've been to plenty of CEU seminars that people have come into class, signed in and are gone before lunch. I guess they must have known everything already so reason to stick around - but I bet they didn't reduce the credits needed for the time skipped. There is good and bad in all walks of life.

I don't know which seminars you attend but the ones I do...if you don't stay in the room you don't get the CPE credit. What you do in the room doesn't matter because the people guard the doors.

[David1980]

Forcing congress to act may be a better solution. Take EIC fraud for example. Obviously the IRS cares, why else add a bunch of new questions to form 8867. You know who doesn't care about a $500 penalty? The guy charging $800 to prepare a fraudulent return. What currently happens to a prepare that does 1000 $800 returns without proper due diligence? If congress acts, perhaps something more punitive can be put into law.

[DexEA]

I don't know which seminars you attend but the ones I do...if you don't stay in the room you don't get the CPE credit. What you do in the room doesn't matter because the people guard the doors.

You should try one of these, come and go as you please, go to the bathroom when you like, no guards at the doors. If you take the two day Tax Insight or Bob Jennings seminar you don't even have to check in on the second day, there is usually plenty of extra seats on day two!

http://www.taxinsight.com/ms-la/home

http://www.taxspeaker.com/live/seminars

http://www.btbtaxlink.com/main.php?type=sem

[taxxcpa]

Attending a seminar can be an easy way to get CPE credits without learning anything. All you have to do is attend. You may or may not be able to sneak out and still get credit, but just attending doesn't teach you anything unless you pay attention and remember what you hear.

The best training is the kind you get with hands-on experience. I had some trouble with a return today and spent a lot of time documenting everything I had to do to finally get everything to balance on the Schedules M-1 and M-2 of a Form 1120S. I made some notes for future reference and the work I did was worth a couple of hours of CPE, but I can go to a class and learn nothing of any benefit if the subject is about something I will probably never encounter.

Reading postings on this forum have benefited me also more than a lot of the CPE courses I've taken.

As to regulating, licensing preparers--there are good unlicensed preparers and bad licensed preparers, but it does seem reasonable to have some official evidence that a preparer has some degree of knowledge before he can hold himself out as a professional tax preparer. A good unlicensed preparer should be able to meet any such reasonable requirements.

[Bees Knees]

Just because someone has some initials behind their name and is "required" to take CEU doesn't make them any better than an unenrolled preparer with no initials behind their name.

Individually, perhaps not always. As a group, yes it most definitely makes them a better preparer. IRS has stats on tax returns prepared by paid preparers. Those stats reveal that tax returns prepared by unlicensed unregulated preparers…as a group…are more likely to contain errors than those prepared by licensed CPAs and EAs. That is the reason why they decided to start the RTRP initiative in the first place.

[Bees Knees]

IRS has stats on tax returns prepared by paid preparers.

BTW, those are the same stats that reveal tax returns prepared by paid professionals…as a group…are less likely to contain errors than self-prepared returns. That is why the computer DIF scores used to rate tax returns for potential audit are tipped in favor of a paid preparer tax return…meaning if you use a paid preparer, you are less likely to be audited by IRS.

[taxea]

Attending a seminar can be an easy way to get CPE credits without learning anything. All you have to do is attend. You may or may not be able to sneak out and still get credit, but just attending doesn't teach you anything unless you pay attention and remember what you hear.

The best training is the kind you get with hands-on experience. I had some trouble with a return today and spent a lot of time documenting everything I had to do to finally get everything to balance on the Schedules M-1 and M-2 of a Form 1120S. I made some notes for future reference and the work I did was worth a couple of hours of CPE, but I can go to a class and learn nothing of any benefit if the subject is about something I will probably never encounter.

Reading postings on this forum have benefited me also more than a lot of the CPE courses I've taken.

As to regulating, licensing preparers--there are good unlicensed preparers and bad licensed preparers, but it does seem reasonable to have some official evidence that a preparer has some degree of knowledge before he can hold himself out as a professional tax preparer. A good unlicensed preparer should be able to meet any such reasonable requirements.

That's basically what I said. I think the CPE should be based on the number of hours, number of returns and types of returns we do. With all the research, experience and training we get during tax time, as well as forum and other resourses we learn from we should get CPE credits.