Enrolled Agent licence

[taxmandan]

We furnish copies of tax returns, but no assurance of the figures in them, as the client furnishes those.

These letters are usually for self-employed people, where there is no third party verification of income. I ALWAYS declaim any assurance of the figures and the mortgage companies have never said a peep about it.

I just did a letter this morning for someone who did his own returns for the past two years. I verified what was on the returns matched the actual returns filed with theIRS by using e-services (love it). The letter only states that I verified what was actually filed, no assurances on anything else.

Daniel

[Jesse]

On my letter head my letter states:

I prepared individual income tax returns for [client name] for the past [ ] years based upon information given to me by [client name]. The returns that I prepared contain a Schedule C and Schedule SE, Self-employment tax computation.

My services to [client name] were and remain limited to the preparation of individual Federal and [state name] income tax returns from information provided to me by the client. I have not reviewed, audited, or otherwise attempted to verify any of the information given to me by [client name]. Consequently, I cannot confirm its accuracy or completeness. You should perform your own independent procedures and tests as you deem necessary for approval of credit.

Sincerely,
xxxxxxxxxxxxxxxx
Enrolled Agent

I recently had a client's mortgage company that wanted proof that I am an Enrolled Agent and wanted my EA #, which I gave to them, they called a few days later and said that wasn't good enough, needed written proof so I faxed the company a copy of my Enrollment card issued from the IRS. This company did say w/out "some form of licensed status" for tax preparation my clients loan would be denied.

I don't understand this, why don't they just get the actual IRS transcript to verify the client indeed did file self employed tax returns because that is all that I am attesting to is the preparation, not the accuracy?

[jainen]

good letter

This is a good letter. It's important to recognize that the lender is trying to shift the responsiblity for a credit decision away from itself. There have been some cases of tax preparers being sued because they signed a false return which the lender relied on.

[Armando Beaujolais]

This is a good letter. It's important to recognize that the lender is trying to shift the responsiblity for a credit decision away from itself. There have been some cases of tax preparers being sued because they signed a false return which the lender relied on.

You are correct. However, I believe all those cases were CPAs who left themselves open by not having a good engagement letter. The classic case is where a CPA prepares a tax return, then when something bad is uncovered at a later date, the client claims to have relied on the assurances of the CPA, having assumed that that with the CPA designation the person was performing audit functions. The CPA claims "I was only doing a tax return," but by that time it's years later, and it becomes a "he said / she said" scenario.

There have been cases where CPAs in good standing are prohibited from using CPA after their name because they're working in a field where the CPA designation is unrelated.

I haven't heard of any cases where a non-CPA was held liable for misstatements by the client.

[Unregistered]

I have been in practice for over 30 years and most of the requests for letter were from marginal business client's seeking loans from companies taking high risk loans.

Sorry about the unregistered status but I'll correct that soon

[Bees Knees]

I recently had a client's mortgage company that wanted proof that I am an Enrolled Agent and wanted my EA #, which I gave to them, they called a few days later and said that wasn't good enough, needed written proof so I faxed the company a copy of my Enrollment card issued from the IRS. This company did say w/out "some form of licensed status" for tax preparation my clients loan would be denied.

I’ve had a similar experience.

However, now I’m beginning to question whether it is a good idea to identify yourself as an Enrolled Agent. What is the point?

An EA license is a license to represent taxpayers before the IRS. Nothing more. It is not a license to assure outside parties of anything. By identifying ourselves as EAs in the context of a client trying to obtain a loan, we are in a sense saying we are something special. As though our tax preparation services represent some kind of assurance that the tax return is correct.

Why would preparing a return as an EA provide a mortgage company any more assurance that the return is correct, than any other tax professional that is not a licensed EA or CPA?

You see my point? By identifying yourself as an EA to the mortgage company, you are sort of saying your tax preparation services is something that can be relied upon when obtaining a loan. That is not what an EA license entitles us to. So we are in a sense exposing ourselves to possible misunderstanding from the mortgage company that may be thinking there is something special about that EA license.

In the future, I’m simply going to say:

“I have been preparing [so and so’s] return for [so many years] as a paid tax preparer, and in every year, to the best of my knowledge, [so and so] was a self employed taxpayer. I am not a Certified Public Accountant.

Signed.

XXX”

If the client needs more than this to obtain a loan, the client can hire the services of a CPA to perform an audit.

[Jesse]

Exactly

I have been in practice for over 30 years and most of the requests for letter were from marginal business client's seeking loans from companies taking high risk loans.

And that's why, as Jainen said, the lender is trying to shift the responsiblity for a credit decision away from itself. And that's why I won't say anything more than I prepared the return.

[sea-tax]

What really gets me going is when the client owns 50% of the stock of a s-corp or c-corp and they want a letter saying that he is self-employed. I try explaining to them that this is not proper that he is a employee of the corp and a shareholder and his title is such and such president or what ever. They look at me like I am crazy.
But like Bees I ususlly keep it short and somethin like "to the best of my knowledge..." and I try to be a vaugue as possible.

[jainen]

taxpayer was self-employed

Like Jesse, I would simply indicate which forms I prepared. I would NEVER offer a written opinion that owning an S-corp or even filing Schedule C means the taxpayer was self-employed.

[Jesse]

However, now I’m beginning to question whether it is a good idea to identify yourself as an Enrolled Agent. What is the point?


Why would preparing a return as an EA provide a mortgage company any more assurance that the return is correct, than any other tax professional that is not a licensed EA or CPA?

I don't see that it would provide any more assurance. In my experiences the mortgage company makes the assumption that you are a CPA, and I just make it clear that I am NOT a CPA because I do not want to get in trouble for representing myself as such on their assumption.

You see my point? By identifying yourself as an EA to the mortgage company, you are sort of saying your tax preparation services is something that can be relied upon when obtaining a loan. That is not what an EA license entitles us to. So we are in a sense exposing ourselves to possible misunderstanding from the mortgage company that may be thinking there is something special about that EA license.

But should you have to hide your identity as an EA? I identify myself to the public as an EA on my letter head and my business card. If the mortgage company wants to read more into the title the misunderstanding should not be my fault. I am not offering any opinions, just the fact that I did prepare the return.

In my case the mortgage company picked up on the enrolled agent and wanted to see proof that I am an enrolled agent. The mortgage company probably doesn’t even know what an enrolled agent is, but now they have a number for their records for the person that prepared the returns, but again, no opinions given.

[OldJack]

I think the question is bogus.

Just another example of why unregistered guests should be allowed to read but not allowed to post.

[Jesse]

But.....

Just another example of why unregistered guests should be allowed to read but not allowed to post.

I don't think the question was really bogus and it did stir up some interesting thought.

I`m trying to buy a property and my lender asked for CPA letter. My accnt. sent them a letter stating that he did taxes for me for several years as EA. After the lender asked him for proof of his licence he is not reachable! He doesn`t answer the phone nor e-mails. I feel that he either doesn`t have one or is expired. Besides that my loan is going to be rejected, I`m also in panic from IRS. What should I do? Can I sue him? What IRS would do to me or him in this case?

What should I do? Settle down, maybe the EA is too busy working on final returns for other procrastinating clients as the due date is Monday, and doesn't have time for the pain in the a$$ mortgage company!

I don’t know what you would sue for but if there is something to sue for the only ones that are likely to gain anything are probably the lawyers.

Unless there are issues other then the matter of being enrolled or not, I don’t think there is anything for the IRS to do, unless the preparer is misrepresenting themselves to be an EA when they are not. I could be wrong, but I don’t believe there is any requirement that the EA provide any proof of enrollment to the mortgage company.

[jainen]

new clients

>>I don’t believe there is any requirement that the EA provide any proof of enrollment to the mortgage company.<<

Of course there is no requirement that you respond at all. It's a matter of full-service to your client. Besides, a loan officer without a clue is a good referral source for new clients.

[Jesse]

>>I don’t believe there is any requirement that the EA provide any proof of enrollment to the mortgage company.<<

Of course there is no requirement that you respond at all. It's a matter of full-service to your client. Besides, a loan officer without a clue is a good referral source for new clients.

I agree with you from the preparer standpoint.

I was responding to the unregistered poster's original question as far as what he can/should do. As far as the preparer not providing proof of enrollment to the mortgage company, legally, I don't think the preparer has done anything wrong. But this is in no way intended to render legal advice!

[Unregistered]

legally, I don't think the preparer has done anything wrong.

So what. You think that not doing anything legally wrong will protect a person from being sued?

Good luck in life.