Based on my experience, the suit came later in the process than I expected, but it didn’t surprise me. What did surprise me were the three petitioners who filed the lawsuit — each of them actually strengthens the Service’s push to regulate the industry.
Claimant #1 is an 80 year old with 30 years of experience preparing taxes by hand for about 100 clients. He charges $30 to $40 per 1040 return and about $75 for a business return.
Claimant #2 is a certified financial planner who prepares about 40 returns each year for some of his planning clients as a “useful service” when those clients don’t already have “accountants” to prepare their returns. He is opposed to the IRS exempting CPAs and attorneys from the requirements while requiring CFPs to adhere to them if they prepare federal reports.
Claimant #3 has been an employee of financial services companies and banks and recently opened a part time tax preparation practice to service the impoverished. The article doesn’t mention if she is still working while operating the part time tax prep business, but based on the clientele and the “part time” designation, I would bet she’s juggling both.
None of the three has an argument with mandatory Preparer Tax Identification Numbers, although they argue the PTIN Fee should be a one-time charge and not an annual renewal charge. What they oppose is the mandatory competency examination and the annual continuing professional education requirements — the added costs for assuring competence to the public.
I’ve had many discussions with friends who are very familiar with the Registered Tax Return Preparer (RTRP) examination. Each of them agrees that anyone with 3 or more years of experience preparing 1040s with a schedule should have no problem passing the exam. They feel the exam’s level of competence could actually be counterproductive because, in their opinion, it lacks the necessary difficulty to “weed out the truly unqualified.”
I’ve also had thousands of conversations with practitioners on the necessity for annual continuing professional education. Nearly all of them passionately support it as a requirement. These include part time preparers, sole practitioners, people working in small tax prep offices, and people owning and/or working in small, medium and large firms.
Why such ardent support? Obviously, an ever-growing and complex tax code requires it to insure the ability to service diverse and often complex clients issues. Just as importantly though, they cited the need to reaffirm confidence in their skill sets, expand their network, and either maintain or build their practice.
I have seen, firsthand, how CPE has literally saved a practice from ruin, and I’ll bet you have too. I can’t count the number of people I know who were faced with carrying on a tax business when their spouse unexpectedly died or was incapacitated. Those who invested in the training and education to develop necessary skills not only salvaged the business, they grew it because they embraced the education process.
I can think of one friend, in particular, who literally farmed out tax return work after her husband’s untimely death in the middle of a tax season, earned her EA later that September, fought to retain almost 90 percent of the existing clientele heading into the next tax season, and then systematically went on to earn her ABA, CFP, series 65, and insurance license to expand her services and grow a thriving small practice. She’s always an “earlybird” in registering for upcoming CPE programs, and I often catch her counseling colleagues on growing their businesses in a quiet corner at a CPE event.
I have no problem with ANYONE who wants to break into the tax preparer business. Tax Preparer Connections was created specifically because I felt tax preparers weren’t offered viable paths into the profession, as well as paths to growing professionally in this ever-changing and complex industry.
I have a problem with people who want to shortcut their way through the system without nurturing the necessary skills to provide important services, and I can’t help but think these three claimants are doing just that.
Charging $30 to $40 for a 1040 with any type of schedule is far, far the lowest amount reported on recent fee surveys I’ve seen and helped conduct. I haven’t seen a $75 charge for an 1120 return since the early 1980s. I have to wonder if the required compilation is even done for that return, and if so, what it must look like.
Offering tax preparation as a “convenience service” for financial planning clients also raises a red flag especially when this claimant questions the need for tax-specific CPE to complete returns. Unless 100 percent of this person’s clients are W-2 wage earners with fairly straightforward retirement and investment plans, he’s dealing with complex elections based on the various options for sheltering money from taxation I’m sure he’s selling his clients on. I would hate to think he’s simply letting a tax software program make such elections and calculations for those clients.
And running a part time tax prep business for the impoverished mirrors a VITA program, not a for-profit business venture. I’ve never seen a successful preparer business with this exclusive type of clientele, and can’t fathom how this claimant could be considering an expansion of her business unless she was also accepting higher income and better-paying clients.
As I said earlier, I expected a lawsuit challenging the new regulations. I just never expected such a suit would so clearly demonstrate why effective regulations are needed.