Washington, D.C. (August 24) -- Edward Karl, vice president of taxation for the American Institute of Certified Public Accountants, urged the Internal Revenue Service to “slow down and get right” its plan to regulate paid U.S. tax preparers.
The IRS proposal, unveiled earlier this year, would impose new rules in four areas: mandatory registration with a personal taxpayer identification number, or PTIN, application of enforceable ethical standards, competency testing and education requirements.
”We strongly believe that the true costs of the regime should be considered in their totality,” Karl said. “They will practically operate to place an immense new cost burden on CPAs and CPA firms, and in particular, the smallest CPA firms that will not be able to as easily absorb new costs.”
The AICPA questions whether the IRS has adequately examined the costs imposed on the preparer community and whether it has fully considered less costly and burdensome alternatives that would accomplish its goals, Karl said in testimony at an IRS hearing to hear public comments about the IRS’s proposed regulations to implement tax preparer registration and the fees tax preparers will be charged for newly acquired personal identification numbers.
Karl said the IRS needs to look at the overall cost of implementing its plan and not just the proposed annual IRS user fee of $50 and vendor registration fee of $14.25.
“Our rough estimates show this cost – to only the small CPA firms for their employees alone – to be at least $390 million in first-year costs for PTIN, testing and continuing education compliance. We do not believe these costs have a commensurate benefit to the government given the existing regulatory landscape,” Karl said.
Karl focused on the AICPA’s opposition to extending the registration, testing and continuing education requirements to non-CPA employees of CPA firms who prepare tax returns, but do not sign them. “We have supported registration and PTINs for all signing preparers, including CPAs, and application of Circular 230 to all preparers. But we are concerned about certain aspects of the IRS proposal, in particular, the extension of the regulatory regime to non-CPA, non-signing employees of CPA firms,” he said.
He explained that CPAs and registered CPA firms are regulated by state boards of accountancy. Licensed CPAs are responsible as signing preparers for the tax return. “Non-signing staff are indirectly regulated by the states through CPA licensees as they assume responsibility for their work,” he said.
Karl questioned the relevancy of the IRS’s proposed competency exam for non-signing preparers, such as a test on the Form 1040 series. “It is commonly known that CPAs prepare the nation’s most complex federal tax forms, and CPA firm staff assist in that process,” he said. Firms are now training staff on many new IRS initiatives, including completing the new schedule on uncertain tax positions and the new international reporting and withholding requirements. “We believe requiring professionals to take a competency test that has zero nexus with their practice area is not the wisest expenditure of resources. These issues are, in part, why we suggested delaying the exam.”
Further, he noted that non-signing employees of CPA firms who are CPA candidates generally must have 150 hours of education to take the CPA exam, the equivalent of bachelors and masters degrees. He said the AICPA does not think individuals studying for the rigorous four-part CPA exam, which covers tax, should have to pay to take a competency exam by the IRS.
Other witnesses included representatives from the National Society of Accountants and the National Association of Enrolled Agents.
The witnesses testified to three representatives from the Office of Associate Chief Counsel at the IRS and Bryon Christensen, Attorney Advisor, Office of Tax Policy at the U.S. Department of the Treasury.
Read the comment letter from the AICPA
http://www.aicpa.org/InterestAreas/Tax/Resources/IRSPracticeProcedure/Advocacy/DownloadableDocuments/AICPAUserfeecomments.pdf
Read the oral testimony from Edward Karl http://www.aicpa.org/Press/DownloadableDocuments/Ed%20Karl%20Testimony.pdf