Our Taxing Times

While I Was Working

While I was busy with taxes the last few days, several things happened I want to share.

First the IRS motion to suspend the injunction against the Loving Decision was countered by the plaintiffs. On Friday, Judge Boasberg ruled that the injunction would remain in place during the appeal. He didn’t agree with the IRS claim of harm. And he did clarify his earlier decision because he felt that the IRS was making it more restrictive than he intended. The PTIN registration can continue as it has been authorized by Congress. And preparers who wish can take the test and qualify to be RTRPs.

The PTIN system has been closed due to the original decision but is scheduled to re-open on Monday. Do take a look at the alert that is on the page concerning the CE requirements and follow the instructions. Paper PTIN applications will begin to be processed again on Monday.

The IRS has extended filing deadlines for taxpayers living in certain New York and New Jersey counties to April 1, 2013. This extension can also include those whose books, records or tax pro are in those counties. In New Jersey, the counties are Monmouth and Ocean. New York counties are Nassau, Queens, Richmond and Suffolk. Details.

The IRS has opened e-filing for most 2012 tax returns but pulled Form 8863- Education Credits at the last minute. They expect the form to be released for use mid-February. That leaves about 30 forms to be released.

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Voluntary Licensing?

With the current IRS licensing on hold, Robert Flach, the Wandering Tax Pro, proposed a voluntary licensing program on his blog and asked for comments and thoughts. Here are mine.

This is all conjecture since we don’t know yet know how the IRS will respond to the defeat. But assuming the decision doesn’t get overturned and Congress doesn’t pass a proper law here is what I think about a voluntary tax preparer certification/licensing program.

The PTIN program is continuing. Loving vs. IRS didn’t change that. I also don’t think the fees will change because the IRS needs to cover the cost of the registration program and PTIN database. Renewal should be annually or at the most every two years. Over 2 years and the lists become stale.

As for the voluntary licensing, which one? It would be nice to think that one of the existing tax preparer organizations will create a definitive program but I can see testing and certification programs popping up all over the place. That could be the downfall of a voluntary program; too many options and criteria. Each program would have their own designation and qualifications. Tax preparers could chose the program they like the best (easiest test, least continuing education, lowest cost). Taxpayers would be confused trying to keep the designations separate.

If I was creating the program, I would have a mandatory test and annual continuing education of at least 15 hours for anyone preparing over 10-15 returns a year. I wouldn’t have grandfathering (sorry Robert) because I’ve seen too many “experienced” preparers make mistakes. If you’re going to have a standard, everyone should have to meet the same standard no matter how long they’ve been in business or how many returns they do a year. Keep it simple.

About the test. It wouldn’t be open book. It should go a bit beyond the minimum knowledge of the RTRP test. If you’re going to competency test someone, you should really test their knowledge especially if you are going to market that person as an expert.

I also don’t care what they call the new program as long as it won’t be confused with “Enrolled Agent”.

The key to any licensing program is education of taxpayers. They have to know how it’s to their advantage to use a certified/licensed tax preparer as opposed to one who isn’t.

So that’s my idea for voluntary certification/licensing; a proper test and continuing education with the same standards for everyone. Then spend some money marketing your graduates to the taxpayers.

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Licensing Pity Party

So much for not dealing with taxes on my last free Saturday.

Yesterday the decision on Loving vs. The Internal Revenue Service was handed down and it was a big surprise. The judge ruled that the IRS must stop the licensing of tax preparers. A permanent injunction was issued. Now we have to wait to see how the IRS will respond.

But I need to rant a little.

This lawsuit involved three tax preparers who claimed in part that the costs of the new tax preparer regulations will force them to stop preparing returns. Bovine excrement! The preparer costs are a onetime testing fee of $116, an annual PTIN registration of $64.25 and the costs of 15 hours of continuing education. How much does the CPE requirement cost? That depends on the courses used. In 2012, I paid $428.50 for 32 hours of course work. That averages to $13.39 an hour. I could have spent less. I’ve seen free CPE and companies that offer packages under $10 an hour. I’ve also spent more for special courses I wanted to take. But working from an average of $15 an hour for 15 hours equal $225 a year for continuing education. So the plaintiffs in Loving vs. the IRS contend that a onetime cost of $116 and an annual cost of about $300 will force them out of the tax prep business. Sorry, but if your business can’t survive a $300 expenses (which can be passed on to clients) then you should really consider not being in that business. Sorry!

But should the continuing education cost really be a new expense for any tax preparation business? How do the plaintiffs and thousands of others prepare for the tax season? How do they keep up with law changes and paperwork requirements?

I understand filing this lawsuit under strict libertarian principles. But part of the judge’s ruling is that this law will cause “irreparable injury” because 2 of the plaintiffs would have to close their businesses. Closing a business for $300 a year plus a onetime testing fee is bogus. Especially when some of the $300 should have been expenses the business was already paying.

Licensing Update- Dec 2012

No big announcement, just a bunch of little tidbits about licensing and other tax pro info which don’t warrant their own posts.

• The IRS has sent out about 700 letters to tax return preparers who look to be disregarding the e-file mandate. The Letter 5097 notifies the preparer that they will be receiving an IRS visitor for an educational visit about electronically filing.
• Hopefully there will be a decision in the Loving vs. IRS law suit soon. The Loving group doesn’t like the tax pro licensing program and are trying to stop it. Both sides have filed Motions for Summary Judgment and agreed to the facts in the case so that the judge can just make his/her decision based on legal issues.
• CPEs for 2012 not appear on a tax pro’s PTIN account. For this year, the IRS will allow preparers to vouch that their CPEs are correct. By the middle of next year, preparers will be able to check their PTIN account to make sure the CPE providers have submitted all passed CPE programs.
• The IRS has changed their mind and will allow RTRPs and provisional PTIN holders to use EA review course for the federal tax law CPE requirement. If you took a course in 2012, talk to the course provider. Info is in the updated FAQ for CPE.
• Numbers- There are about 737,000 tax pros renewing their PTIN for 2013. There are also 40,000 new RTRPs and 15,000 new EAs since 2009.

Thanks to NATP for their heads up to the info in this post.

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Sandy Adjustments

As with any natural disaster, Sandy has caused some problems and adjustments for taxpayers and preparers.

The IRS has announced that taxpayers in the Mid-Atlantic and North Eastern states have until November 7the to file and pay tax returns which are due today. This is mostly payroll and excise taxes and the extension is automatic. If the taxpayer does receive a penalty notice for this period, they should contact the IRS and they will abate the penalties. See IR-2012-82.

From TaxPro Today, the IRS said that the PTIN system was down yesterday (I assume that means it’s up now but don’t be surprised if it’s not.) Also Prometric has cancelled tests for both RTRP and SEE in some East Coast areas for Wednesday. They will contact test takes by email with notice of the closures and how to reschedule.

If you aren't in a Sandy affected area, think about making a contribution to the Red Cross, Salvation Army or other disaster relief organization. It might be tax deductible for you. If not, it'll make you feel good.

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Current Tax Pro Numbers

To go with the previous post, the IRS has the current numbers (dated 10/1/2012) of all catagories of tax pros.

 

Playing Chicken With a Career

Earlier this month, the IRS sent out 312,000 letters to tax pros with PTINs reminding them of the need to pass the minimum competency exam by Dec. 31, 2013. This is a reminder the Service has been making all year. Currently, a tax pro can get a provisional Preparer Tax Identification Number (PTIN) first and take the test later. Starting Jan. 1, 2014, however, the test must be passed before a PTIN is issued. Anyone with a provisional PTIN who hasn’t passed the test Dec. 31, 2012 will lose their PTIN and be unable to prepare tax returns until the test is passed and a PTIN is issued.

The RTRP test is being administered by Prometic at their exam sites around the county. While Prometic has about 270 sites offering the RTRP test, there is concern that tax preparers will find it harder to book a testing time the closer it gets to the deadline. The IRS has repeatedly said that they will not extend the December 31, 2013 date. 14 months to test 312,000 preparers may seem plenty of time, once you pull weekends and holidays out of the time, add preparers who have to retake the test, factor in tax season, that Prometric also offers other tests limiting the seating available for the RTRP, you can see why the IRS is concerned. Procrastinating tax pros may find they can’t get a testing time at the last minute.

So, why are so many people putting off the test? I am sure part is plain procrastination. Fear of testing is a rational I’ve heard a lot. And waiting to hear from colleagues about the test is a logical reason to wait. But I wonder how many people are holding off to see if the test goes away or the IRS extends the testing time. How many tax pro are holding off to see if the IRS changes their mind about the testing?

After all, who want to spend the time and money on the test if there’s a chance the program will be stopped? Commission Shulman’s five year term ends November 9th and a new IRS Commissioner will be taking over. It could be that the new commissioner would put the program on hold to review it for themselves. And who knows what the election will bring? It’s possible that a change in Administration or Congress might affect the tax preparer licensing program. Even if there is no change to the licensing program, it seems to me that a lot of preparers are playing a game of Chicken with the IRS. They’re thinking that if enough tax pros procrastinate the IRS will have no choice but to extend the testing period to keep tax return filing going. They point to previous delays. But those delays were because the IRS didn’t have the programs running. They were not because of tax pro procrastination.

There is a chance that licensing will magically go away or the IRS will extend the testing deadline for provisional PTINs. But are the small chances either will happen worth playing chicken with a career, even for a year? Even for a few months?

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PTIN Renewal Is Open

The PTIN system for registration or renewal is open for the 2013 tax season. The site was redesigned so expect changes.

PTIN Renewal.

e-Services and TIGTA

One of the better services that the IRS provides to the tax pro community is e-Services. e-Services is a web based suite of tools that can help tax pros resolve problems their clients are having with the IRS. It allows the preparer to file forms 2848 (Power of Attorney and Declaration of Representation) and 8821 (Tax Information Authorization) with the IRS, get transcripts of their clients returns or accounts,  resolve account issues by secure e-mail, match TIN with names and create or modify their e-File Applications. Recently, the Treasury Inspector General for Tax Administration (TIGTA) has looked at e-Services and found some concerns.

 TIGTA’s concerns are centered on Disclosure Authorizations (Forms 2848 and 8821). They have found that some IRS employees are accessing information through e-Services that they shouldn’t access, some preparers do not have signed copies of Forms 2848 and 8821 before they file the forms online, that some preparers are using Form 2848 to access transcripts and some preparers are using Form 2848 when they shouldn’t.

As an Enrolled Agent (EA), I have the ability to represent clients before the IRS. To do that, I need a completed Form 2848 (Power of Attorney) on file with the IRS. If possible, I want to be able to file that form through e-service. If I mail or fax the form, there is a processing delay before I can access the information I need. What TIGTA found was that about 8.3% of the taxpayers they surveyed didn’t sign a completed Form 4828 before the tax preparer filed it through e-Services.

TIGTA is also concerned that Form 2848 is being used just to get transcripts. From reading the report, if I just need to get a transcript of a client’s wage and income for a year so I can prepare a return, TIGTA would say I need to use Form 8821 instead of the Form 2848. If I need the same transcript to deal with a CP2000 notice where I will be representing the client, then I can use the Form 2848.

Only EAs, CPAs and Attorneys can represent any client. An un-enrolled preparer or a RTRP can only represent a client (with a Form 2848) when they signed the return and they’re limited what they can do then. TIGTA found that many were fling Form 2848 when they were not eligible to file the form.

Finally, some IRS employees are accessing e-Service to get taxpayer info (from transcripts and disclosure authorizations) that they normally wouldn’t be able to get.

The IRS generally agreed with TIGTA that there are changes that can be made to the e-Service program that will lessen the issues TIGTA found. They will work to educate tax pros as to who is allowed to use the Power of Attorney (Form 2848) and having a completed and signed copy on file at all times. They didn’t go as far as agreeing to create the compliance verification program TIGTA suggested. The IRS also agreed their employees shouldn’t have access e-Services and requested TITGAs supporting info to further investigate each case.

The big issue is that the IRS doesn’t have a problem with tax pros using a form 2848 to get transcripts but TIGTA does. My thinking is that I don’t know what I will find on the transcripts I request and if I don’t start with the Form 2848 (the most expansive) then I may need to bring the client back in and get it signed later. (As long as you are eligible to use Form 2848.)

It seems that the tax pro issues are based in the recent changes in licensing, Circular 230, and the business of preparing taxes. Too many preparers need to acknowledge that the rules have changed and follow the current rules.

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Williams Leaving RPO

I haven’t written about licensing for a while so an update is in order.

Both the weekly e-newsletters from NATP and NAEA are reporting that David Williams is leaving the Return Preparer Office. Mr. Williams has been the director of the RPO since it was created three years ago. He will be replaced by a 20 year veteran of the IRS, Carol Campbell. Ms. Campbell is Commissioner Shulman’s Deputy Chief of Staff and has also worked in the chief counsel office and the Taxpayer’s Advocate office.

The IRS is doing a lot of renovation of their web site and that include the PTIN system. The site has been updated and behind the scenes, the IRS is working to streamline the interface and make it more user-friendly. All the changes are expected to be completed by the time PTIN renewals open in October.

US tax pros who haven’t taken the RTRP exam yet will be receiving an e-mail from the IRS. The service is very concerned about the number of preparers who haven’t taken the test yet. 10,000 tax pros have passed the test and can now call themselves RTRPs. The IRS estimated that 330,000 still need to take the test in the next 16 months. If they haven’t passed the test by then, they will lose their provisional PTIN and be unable to prepare tax returns. After January 1, 2014, those who want to prepare taxes will have to pass the RTRP exam before they will be issued the required PTIN. The exam is being administered by Prometric at their test sites around the US. Besides the RTRP and SEE (EA exam), Prometric administers a wide variety of tests for other organizations. There is a real concern that tax pros will find that they can’t get a test time if they wait too long. The IRS has repeatedly maintained that they won’t extend the deadline.

According to Face the Facts USA, there are more tax preparers in the US than law enforcement officers and firefighters combined. Face the Facts cites 1.2 million tax preparers compared to 765,000 law enforcements officers and 310,400 firefighters. Actually, I think their tax pro number is out of date. 1.2 million was the IRS estimate of tax preparers when the tax preparer registration began. The last I heard was that the IRS has issued under 800,000 PTINs.

Finally, not really licensing but in IRS news, the IRS website will be updating their look on August 30^th. Actually, they are taking the front page redesign and applying it to their whole site.  While the IRS expects that we shouldn't have problems with bookmarks/favorites, they suggest checking them after the conversion to be sure.

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