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.

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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.”