Washington, D.C. (May 6, 2010) — The American Institute of Certified Public Accountants said today at an Internal Revenue Service hearing that a plan to require a unique identification number for all paid U.S. tax preparers with penalties and ethics requirements will improve the competence and ethics of non-CPA tax preparers but a proposal to provide an IRS exam risks confusing the marketplace.
In addition, the AICPA noted concerns about requiring employees of CPA firms who do not sign tax returns to get an ID number.
“The IRS needs a useful way to identify and track tax preparers who have high error rates or are engaging in fraud,” Patricia Thompson, vice chair of the AICPA’s Tax Executive Committee, said. “Requiring all tax preparers to use a unique ID number should provide big administrative gains for the IRS and help protect taxpayers.”
Thompson told the IRS that taxpayers must not be confused by the name used to describe tax preparers who have a preparer tax identification number or PTIN, but are not CPAs, attorneys or enrolled agents. “Taxpayers need to be able to distinguish between the professional capabilities and education of the different groups of tax preparers,” she said.
The proposed regulations would start to implement a plan the IRS released in January to register and assign a PTIN to all paid tax preparers who will file tax returns in 2011. The IRS expects to begin registering tax return preparers in September.
Thompson said the AICPA opposes the provision in the proposed regulations requiring employees of CPA firms who help prepare tax returns, but do not sign returns, to get a unique ID number. “PTINs are not necessary for non-signing preparers in CPA firms,” she said.
“Tax returns prepared in CPA firms are generally reviewed and signed by a CPA, who is responsible for the overall accuracy of the return under both the Internal Revenue Code’s preparer penalty provisions and the CPA profession’s ethics rules,” Thompson said. “The IRS should be able to contact the signing preparers who have the records of who in the firm worked on a particular return.”
She said taxpayers are further protected when a CPA prepares their tax returns because CPAs and CPA firms must register with their state boards of accountancy, which subject CPA firms and their employees to the state’s ethical and competency rules.
The fee for obtaining a PTIN needs to be reasonable, Thompson said. “The amount of the user fee should cover only the cost of issuing the PTIN; we do not believe the fee should be used to generate surplus revenues or pay for increased staff to manage the various aspects of preparer regulation.”
While the proposed PTIN regulations do not address education and testing requirements that are another part of the IRS’s plan, Thompson said any new IRS examination process should be delayed. “The AICPA believes that successful implementation of the new PTIN registration process, coupled with making all preparers subject to penalties and Circular 230 ethics standards, should be sufficient to address problems with unethical and incompetent tax return preparers.”