Further Thoughts on Preparer Regulation

It’s been a long, long time since I’ve written a long, rambling, stream-of-conscience blog post full of side notes and parenthetical references. But when I sat down to write this post, a whole lot of thoughts came out. So here, in 600+ words, is my opinion on the apparent death of the RTRP designation, and what the future holds, especially for Enrolled Agents like me.

—–

The IRS lost a court case on Friday that basically dismantles the entire preparer oversight system the IRS had tried to implement.

No more RTRP exam. Apparently the RTRP designation itself — at least as envisioned by the IRS — goes away.

I haven’t posted anything about this ruling because 1) I didn’t get a chance to post my thoughts right away, and by now, this topic has been covered by many others (click here to see Joe Kristan’s opinion on the ruling; Joe provides links to more than 10 other articles on Friday’s ruling); and 2) my opinion hasn’t changed from what I’ve consistently said before — the IRS’s attempts at preparer oversight were doomed to failure and created unneccessary beuracracy in the form of a useless RTRP examination.

National Institute of RTRPs?

Robert Flach (aka The Wandering Tax Pro) responded to the ruling by proposing the creation of an independent organization called the “National Institute of RTRPs” that would issue and oversee the RTRP license.

Robert’s idea has a lot of merit. An independent overseer of the RTRP designation would be more likely to be successful than the IRS’s lame attempt. And certainly there needs to be some way to hold the unlicensed accountable, especially in regards to continuing education.

But as an EA, I will always be concerned with defending the EA “brand” — what little “brand” we have.

The EA designation was/is superior to the RTRP designation in every way, yet there was and still is a very real possibility that EAs would get steamrolled and pushed even further to the fringes of the tax world — even though we should be at the FOREFRONT of the tax world, instead of being treated as the equivalent of Liechtenstein.

Outnumbered 12 to 1

As of January 3, there were 48,000 EAs, 53,000 RTRPs, and another 320,000 unlicensed preparers who needed to take the RTRP test.

Add in 225,000 CPAs in the tax world and the numbers are: nearly 600,000 preparers who are unlicensed/RTRP or CPA.

And just 48,000 EAs.

We’re outnumbered 12 to 1.

CPAs already have the backing of the AICPA. If RTRPs get the legitimacy of a national, independent organization, they could easily join CPAs as the “United States of the tax world” (read my “Lichtenstein” article to understand my comparison of designations to countries).

We’re outnumbered by designations that have, or could have, the backing of large, national organizations to tout the wonders of their designation.

So where do EAs fit in?

I Refuse to Become an RTRP

Some will say “well, just become an RTRP.”

But why should I have to get a LESSER DESIGNATION?

We’re equals to CPAs (in the tax world) but I guarantee that most people think EA is a lesser designation than CPA. And I have a feeling most people will think EA is a lesser designation than RTRP or whatever the hypothetical independent organization would choose to call it.

We have a major branding problem, and I’m not sure how to fix it.

It’s Not About “Going Out of Business”

Whatever happens, my practice will be fine. I’m not worried about going out of business.

I’ve never had a client question my designation.

(I did have an investment advisor tell me one time that I need to become a CPA if I “want to make it” in this business. I just smiled politely back at him.)

Upwards of 90% of my new business comes from referrals from other clients, from professionals I’m connected with, or from professional groups I belong to. I’m not going head-to-head with CPAs, RTRPs or unlicensed preparers for clients, not really. I’ve made connections, and those connections funnel business to me.

I’ll keep chugging along.

My concern is more for the EA name itself. I really fear that EAs are getting pushed further and further to the margins. We’ve always been on the margins, so how much further can we be pushed?

The problem is, there’s no good solution for how to enhance and protect the EA name, because there’s so few of us.

So again, where do EAs fit in? There’s just not a good answer or good solution.

“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”

12 Responses to “Further Thoughts on Preparer Regulation”

  1. Robert D Flach January 22, 2013 at 7:29 am #

    JD-

    You are wrong. In the tax world EAs are not equal to CPAs. EAs are superior to CPAs.

    TWTP

  2. Amber in Albuquerque January 23, 2013 at 11:36 am #

    I’m pretty new to this business and I didn’t exactly enter it by choice. I am, however, a fast learner and the (previously unregulated) practice that I inherited largely comprises clients with fairly simple tax returns who live in small, rural communities. In other words, as my practice exists right now, the EA designation is overkill. These are people who have one W2 and no bank account (“have them mail the refund check please”) who simply DON’T DO PAPERWORK. I know it’s hard to fathom; I have a hard time with it myself.

    I was happy to get the RTRP designation (now worthless) because it provided me, a new but ethical and competent preparer (one who knows well the limits of my training and happily refers clients with complex returns to other more qualified preparers), with some credentials that indicate that I have at least a minimum competency in tax matters.

    I don’t do business returns right now, so the full EA is too much, too soon for me. I fully intend to get it eventually. I’ve discovered I really like the field.

    I read a comment on another blog explaining how the IRS overstepped because “preparing a return is not ‘practicing’ before the IRS” and they are only allowed to regulate those who ‘practice’. This makes sense. I would like to see the RTRP as a “beginning steps” for people like me who really only prepare personal returns with ‘limited practice’ such as responding to computerized notices, etc. and only for clients for whom we have prepared returns. I guess I’m asking for a redefinition of ‘practice’ or that an allowance be made for ‘limited practice.’

    I don’t want to dilute the EA brand. But I think there are a lot of good preparers out there who don’t need to be EAs (or CPAs or attorneys).

    All that said, I think that the CPE requirements for RTRPs are not stringent enough. Fifteen hours isn’t all that much even for people who only prepare personal returns. I’m sure I took over 30 last year and did a lot of research “on the side” because I find the subject so interesting.

    On another blog someone referred to the RTRP designation as “training wheels” and while I find this condescending, it isn’t entirely untrue. As a newbie to the profession I’d like a chance to maintain a licensed (vetted) “limited practice” while I’m working towards becoming an EA. But for those people who decide their practice doesn’t warrant the full EA designation, the RTRP would be a good option. Of course those people should be required to act with the same ethical standards all other practitioners are and to tell clients they are not regulated for business returns, they cannot represent clients in a full audit situation, etc. In other words, customers should know the difference between the two “brands”. The RTRP is a Ford Focus; the EA is a Lexus sedan.

    • Jason Dinesen January 23, 2013 at 11:52 am #

      Amber,

      Thanks for writing! I agree, the EA designation is probably too much for many preparers. There are no easy answers for how to oversee the tax prep industry. Maybe making the RTRP a voluntary IRS designation (like EA is) and promote it as sort of a “junior” designation on the path to being a full EA.

      At the very least there needs to be a CPE standard that applies to ALL preparers, including CPAs and attorneys. I was always opposed to the testing piece of preparer oversight, but not to the CPE piece. And at any rate, you are right, 15 hours isn’t anything major for someone who considers themselves a tax “professional” to be getting.

      I like your Ford Focus/Lexus analogy – I might steal that for future use. :)

      Jason

      • Amber in Albuquerque January 23, 2013 at 11:59 am #

        Absolutely it could/should be voluntary! And it would be lovely (if wishes were horses) if the IRS and the various professional organizations (NATP, etc.) could/would push some effective marketing efforts towards explaining what a taxpayer should expect from each designation.

        I get what you’re saying on the testing too. I liked the open book format on the RTRP exam because so much of our profession isn’t about knowing instant answers (or the moving target of various phase-outs and thresholds) but about being able to look them up when necessary. Honestly, even though I’m pretty confident on most of the basics now, I STILL look stuff up just to double check. So yeah, what good is a test, especially when the rules change so often.

        And by all means, steal the analogy—you actually have an audience on which to use it. :)

  3. Rebecca January 25, 2013 at 8:44 pm #

    Hi, I was planning to take the Enrolled Agent exam this month and was prepared to pay the PTIN fee of $64.25 today until I saw the notice of PTIN system suspension. Does that mean that I cannot take the Enrolled Agent exam as of now, as it seems the IRS website did not make any updates to Enrolled Agent requirements (which includes obtaining PTIN prior to exam registration). Please advise how to proceed. I am in a good position to take the exam now (time wise) and the window is to close at the end of Feb. I was hoping to complete all 3 parts before end of February.

    Thank you.

    • Jason Dinesen January 25, 2013 at 9:15 pm #

      I’m not 100% sure, but based on what I see on the IRS website, unfortunately, it looks like you’re out of luck right now. Hopefully the IRS will reopen the PTIN system soon. Makes for a big inconvenience to people like you who want to take the SEE.

      PS, good luck, whenever you get to take it. :-) I took the 3 parts in order. I didn’t like Part 3 at all, though I passed on the first try. My favorite was Part 2. It was like a fun brain exercise, with all the basis and depreciation questions and calculations.

      • Rebecca January 25, 2013 at 11:14 pm #

        Hi Jason,

        Wow – didn’t expect such quick reply – thank you!

        I guess I am out of luck for this month. I have passed all of my CPA’s and decided while REG is still fresh in my mind to attack the EA. Thank you for your feedback though about the exam, I heard part 2 was the hardest, so I plan to take part 1 first for that reason.

        Can I message you if run into questions regarding EA exam?

        Thank you a bunch,

        Rebecca

        • Jason Dinesen January 26, 2013 at 5:08 am #

          Sure, I always enjoy talking to aspiring EAs. Feel free to e-mail me.

        • Jason Dinesen February 2, 2013 at 11:01 am #

          Rebecca – It looks like the IRS has put the PTIN system back on line as of the first of February.

          • Rebecca February 2, 2013 at 11:10 am #

            Thank you! It’s funny, I was just checking the system and started to register when received your email. Appreciate your concern and attention, it’s very nice of you.

            Rebecca

Trackbacks/Pingbacks:

  1. Tax Roundup, 1/22/2013: Phil, we have altered the deal. Pray we don’t alter it further. « Roth & Company, P.C - January 22, 2013

    [...] Jason Dinesen,  Further Thoughts on Preparer Regulation: [...]

  2. Tax Roundup, 2/11/2013: Suing the driver of the getaway car for not going fast enough. « Roth & Company, P.C - February 11, 2013

    [...] very least, I see no overwhelming support for the preparer registration program from EA-bloggers Jason Dinesen and Russ [...]