Allen Bostrom – Universal Accounting

Every year, since 2004, there’s been chatter regarding tax preparer registration or licensing.  Five years ago, there was even legislation proposed, but other priorities trumped it and it was allowed to die.  Each year, since that time, someone has tried to carry the flag, but with minimal success even though the abuse of RALs and error rate for Earned Income Credit claims have been rising.

This year is different.  In past years, the support for preparer licensing from various groups, including the IRS, wavered and any effort to get expert input was mixed, at best.  This year, Commissioner Shulman of the IRS, has taken the wheel and made it his aim to propose a program to the President by yearend that will create some federal oversight for over 1 million tax preparers.  Scheduled panel discussions in DC, with various industry groups, have begun the dialogue, which will continue for the next few months.

Similar to all industry licensing policies, the purpose of Commissioner Shulman’s proposal is twofold:

1)      To ensure tax procedure competency among tax preparers

2)      To provide the authority and tools for the IRS to police the industry against unprepared or unethical tax preparers.

Meeting this goal could take several different paths.  Among the issues being considered in the panel discussions is what type of testing will be necessary, how quickly will this program be instituted, and what level of continuing professional education will be required.

Most agree that at some point every preparer will need to take a test.  Whether or not this test is nationally standardized, online, open book, or developed and given by various bodies, has yet to be determined.  Those currently testing tax preparers such as associations and educational providers, including Universal Accounting, are requesting that the IRS accept test results from various providers as long as the exams meet standard testing qualifiers.

Annual Continuing Professional Education (CPE) is certain to be required to maintain a registration or license.  The likelihood is that it will be somewhere around 20 hours per year which can be earned simply by attending one of the inexpensive six IRS symposiums held throughout the US.

Grandfathering tax preparers that have accurately filed a considerable number of tax returns with an acceptable low error rate, or exempting tax preparers that file very few returns each year (maximum five, or $1,000 in billings) and VITA preparers are issues that are being considered.

It’s apparent that whatever is determined will need to be phased in to avoid a huge disruption during tax season.  It’s my opinion that the most likely scenario is to see 2010 legislation become effective January 1, 2011.  The first phase will require all commercial tax preparers to register with the IRS during 2011.  Testing and CPE reporting will not be necessary until 2012 earliest, but more likely 2013 or 2014.

I’m looking forward to attending the September 2^nd Panel discussion and will try to keep you posted.