Will the IRS Modify the Law to Win the RTRP Battle? Ya, They Have That Kind of Power!

The IRS has been extremely quiet recently about he IRS Exam for RTRP, (Registered Tax Return Preparers)  Those of us who already passed the exam are continuing to use the letters behind which designates us as RTRP.

To be honest, I'm a little nervous about how silent the IRS has been over this matter.  In my opinion, the outcome can't be good for preparers.  When the IRS is this silent, it usually means they are coming up with ways to WIN the battle!  (Of course I only have 15 years of professional experience with them, perhaps those who have been tax professionals for a much longer time can shed some light on the situation.)

Below is a letter from one of the educational providers:


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May 2, 2013

I am resuming my email communication with you, my Newsletter subscriber, after the suspension of the RTRP exam last January.   Many RTRP exam candidates were caught by surprise in different stages of their preparation for the RTRP exam. And most were left confused an unclear on how to proceed for lack of a pronouncement by the IRS on several questions regarding the RTRP exam.   It looks like the future of the RTRP exam depends on whether the IRS wins its appeal on the Loving vs IRS case or congressional initiative to modify the law prosper. Getting the RTRP credential on a voluntary basis does not seem likely because the agreement to administer the exam included a clause prohibiting the vendor (Prometric) from offering it for voluntary compliance -according to the IRS.   If you want to sign a petition supporting the law modification, you can go here     So, one alternative for non-credentialed tax preparers is the Enrolled Agent exams or the SEE-Special Enrolment Examination which is a voluntary credential. The Enrolled Agent is, perhaps, the most authoritative denomination in the tax preparation industry because the content of its three exams is substantially more comprehensive than the content of the RTRP exam. The Enrolled Agent is required to demonstrate much broader competence in its practice before the IRS than is expected from the holder of an RTRP credential. I will be including more information about the Enrolled Agent's exam in future emails.   In the meantime, I hope tax preparers who already earned the RTRP credential are promoting its merits, giving it credibility and legitimacy among clients as well as in their marketing initiatives. As taxpayers become increasingly demanding and skeptical consumers (with all the threat and fraud cases going on in the tax preparation industry), being a credentialed tax professional will increase your competitive advantage and your revenue potential because you are viewed as a more valuable operator in the tax return preparation marketplace.   From our side, we have good news. Even though the RTRP exam is currently suspended, we have been updating our study materials to the changes introduced in the laws and regulations for 2013. We have also a new line of tax preparation as well as other new learning tools such as the tax study cases.   We believe that a decision to invest in education is always a good decision because, in reality, it is an investment in you. To contribute along those lines, I am making available a new, updated version of the 1040examprep study materials.   I will leave you until next week with the New York attorney general advice to taxpayers about best practices in hiring tax preparers in order to avoid "deceptive and fraudulent practices..." during the tax season.   I challenge you now to test the tax preparation service you provide by seeing if you measure up to the following recommendations of a New York attorney to clients before they hire the services of a tax preparer. Following are the attorney's recommendations.   Use recognizable and established companies; Check the tax preparer's qualifications; Check the tax preparer's history through the Better Business Bureau (www.bbb.org); Ask for a written estimate of all fees; Avoid those who base their fees on a percentage of your refund; Make sure the tax preparer is accessible, even after the April due date; Never sign a blank return; Review entire return before signing; Make sure the preparer signs the tax form and includes a Preparer Tax Identification Number, or PTIN; Avoid "too good to be true" promises; Consult New York's "Consumer Bill of Rights Regarding Tax Preparers." Did you pass this test?   We suggest you offer the following guarantees for your services and make sure you deliver on each and every one of them. This text you can add to your written communications - emails, letter and similar: "We provide written estimates for all fees of our services and our fees are not based on a percentage of any refund. We and our staff members are all credentialed tax preparers and we sign every tax return we prepare, and include our PTINs. We are accessible year round at our address and phone. Most importantly, we adhere to the IRS code of ethics (Circular 230) and those of (tax preparer associations) that we are member ".   Sincerely,   Norma Wahnon   P.S. Hopefully next email will bring the access to the reformulated website.

The IRS Shuts Down Testing of Tax Preparers Due to Recent Court Ruling

OK now we are going to have double standards in the Tax Preparer Industry.  Those who have passed the RTRP Exam and those who have not.  Humm....... Interesting
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The Internal Revenue Service reacted Tuesday to the surprise ruling Friday by a federal judge striking down the IRS’s authority to regulate tax preparers, shutting down its Preparer Tax Identification Number registration system and its testing system for tax preparers.

 

U.S. District Court Judge James E. Boasberg ruled against the IRS and in favor of three tax preparers who filed suit with the help of a libertarian law firm, enjoining the agency against enforcing its Registered Tax Return Preparer requirements (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers).

“As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers,” the IRS said in a statement Tuesday. “In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

“The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program,” the IRS added. “It is considering how best to address the court’s order and will take further action shortly. Please continue to check this site as additional information becomes available.”

IRS spokesman Dean Patterson said Tuesday that the IRS had no further comment at this time.

The director of the IRS’s Return Preparer Office, Carol Campbell, held a brief conference call Tuesday afternoon with representatives of approximately 25 stakeholder associations such as the National Association of Tax Professionals. Campbell verified that the online PTIN system is down and the IRS is no longer allowing the scheduling of RTRP exams. The IRS also told participants on the conference call that the RTRP testing system would go down by the end of the day, and if preparers have an exam scheduled, they would not be able to take it.

Paul Cinquemani, director of government relations at the NATP, who was on the call, said Campbell told them, “I thought about taking questions, but frankly, we don’t have all the answers.” Cinquemani also reported that Campbell encouraged the participants on the call to send in their questions, so the IRS could take them into consideration as it determines how to move forward.

Cinquemani believes the PTIN registration system will only be down temporarily. The system for registering to take the RTRP exam was handled through the PTIN registration system, so the former was most likely closed down to disentangle it from the latter.

In the case challenging the IRS’s authority to regulate tax preparers, three independent tax preparers—Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wis.—joined forces with the Institute for Justice, a libertarian public interest law firm, in filing suit against the IRS in the U.S. District Court for the District of Columbia.

“The decision in the Loving case took most people in the industry by surprise,” said Cinquemani.

“There is a clamor for information and answers to questions that just won’t be available for weeks, if not months. The IRS released a statement today that did not reveal much. One could read an intent, in the second paragraph, to pursue the court decision further. It seems to me that the IRS has the following options available: They could appeal the court’s decision and ask for a stay of the injunction in the interim; they could go ask Congress for a piece of legislation that would grant them the authority denied by the court; or they could consent and comply with the decision. If they did this, they could either abandon the registered tax return program entirely, or make it a voluntary credential to be earned as the EA designation is.”

The National Association of Enrolled Agents also weighed in on the decision. “This decision is—at least temporarily—a setback for taxpayers, and for tax administration,” said Robert Kerr, senior director of government relations at the NAEA, which represents over 45,000 enrolled agent tax practitioners. “Some would argue, in fact, that the decision is a victory for those who would like the right to remain incompetent, to remain completely ignorant of the many annual changes in tax law and administrative procedure, and to foist the cost of their willful ignorance onto their clients.”

Fred Slater, CPA, managing member of New York City-based tax prep firm MS1040 LLC and former chair of the New York State Society of CPAs’ IRS Relations Committee, said he agrees with the judge’s decision in the case. “I think it’s a good decision in terms of reality because what has happened is the IRS set up all these guidelines to try to ‘regulate’ the tax preparers, and then once they did that they proceeded to exclude the CPA, the enrolled agents, to some degree, and the tax attorneys so you ended up with a dual system, which is fine because that’s the practicality of what each side services,” he said. “Then they proceeded to put out rules of what both sides are supposed to follow, and you can’t do that. You end up with this situation where everyone is registering, and paying 60-something bucks every year to prepare tax returns. What could happen and what I’m hoping will happen is that Congress will respond to it, not the IRS, and come out with two sets of rules. There should be a set of rules for those that are not enrolled, not CPAs and not tax attorneys, because they don’t have the official training, and they don’t have the ethics codes that we have to have. I’m not saying that all CPAs and attorneys are perfect, but that’s the group that is the most out of control and they are trying to regulate that.”

He also sees a role for the states regulating the tax preparation profession if Congress is unable to pass a law, but he pointed out that many tax preparers have clients in multiple states. Currently only two states have laws requiring registration, testing or continuing education of tax preparers: California and Oregon. Congress has reportedly failed to pass eight different bills over the past decade aimed at giving the IRS the ability to regulate tax preparers.

While Taxpayers Weren't Looking, IRS Quietyl Reinvented an Extension of Itself

The changes have been in the news, however, if you weren’t looking for it, you may have not noticed.   The end results, of the Internal Revenue changes appear to be slow and deliberate.  After 2013 there will be no more tax professionals available to the public who are not registered and tested by either the State or the Feds.

Starting January 1, 2014, the Internal Revenue Service will have its hand on the pulse of every tax professional either directly or indirectly, depending on the initials behind their names.

Tax Attorneys and CPAs will continue to be screened, tested and licensed by the State in which they live or do business in.  Enrolled Agents and Registered Tax Return Preparers (RTRP) will be screened and tested by the Department of Treasury, Internal Revenue Service.

When you first look at this new organizational chart the tax professionals who represent the IRS, as Independent Contractors, you might believe the recent changes would benefit Tax Attorneys and CPAs, and for the most part this could be true.

Yet, one you become a part of the changes by completing the new requirements imposed upon tax preparers, you begin to see a slightly different picture emerging.  The change enables, the IRS to become completely self-contained.

With the new Registered Tax Return Preparer (RTRP) the IRS has managed to enroll and register all levels of individual tax preparers, who prepare taxes for a fee, except Tax Attorneys and CPAs, who are licensed by the States.

Enrolled Agents and RTRP have no state boundaries and can work across state lines.  Get ready people, because a change has already occurred when most of us weren’t looking.  My grandfather always said it was the “little things,” that you have to watch out for.