AICPA Expresses Strong Concern over IRS Program

The Internal Revenue Service (IRS) just couldn’t wait for Congress to pass legislation giving them the authority to regulate unregistered paid tax return preparers.  So, on June 26, 2014 the IRS announced a “voluntary” Annual Filing Season Program (AFSP) outlining the new program that focuses on continuing education and filing season readiness for unregistered paid tax return preparers.

The AFSP program will allow unenrolled return preparers to obtain a record of completion when they voluntarily complete a required amount of continuing professional education, including courses in basic tax filing issues and updates, ethics, as well as other federal tax law matters.

According to IRS Commissioner John Koskinen, “This voluntary program will be a step to help protect taxpayers during the 2015 filing season.” However, not everyone agrees with the commissioner.  In fact, the AICPA calls the program unlawful and improper.

The following are excerpts from the AICPA’s letter to IRS Commissioner Koskinen explaining the basis for their concern:

I.                 The IRS must identify a statutory basis for any regulatory approach it creates.

·       No statutory authority, including 26 U.S.C. § 7803, authorizes the proposed program.

·       If the IRS cannot identify a clear, specific statutory basis for its action, then under the Administrative Procedures Act (APA) it may not act.

II.              A purportedly “voluntary” program would be an end-run around Loving vs. IRS.

·       The proposed program would also undermine the legal rationale given by the court in striking down the tax return preparer regulations.

·       The “voluntary” program would undermine the important concerns underlying Loving.

III.            The IRS must comply with procedural requirements.

·       The IRS must comply with the APA’s Notice and Comment procedures.

·       The IRS must comply with the Paperwork Reduction Act and with Executive Order 12,866 (Regulatory Planning and Review).

IV.             The proposal is arbitrary and capricious.

·       A voluntary program would not address the problem of unethical or fraudulent tax return preparers.

·       A voluntary program could give rise to confusion among consumers.

·       The IRS has not sufficiently considered alternative methods of ensuring that tax return preparers are qualified and competent.

For a complete copy of the AICPA’s 14 page letter go to the following website: http://www.aicpa.org/Advocacy/Tax/DownloadableDocuments/AICPA-Letter-to-Comm-Koskinen-June-24-2014.pdf .

I think the IRS is trying to do the right thing, but I believe that they are going about it in the wrong way. I agree with the AICPA that any approach the IRS takes must be supported by a strong legal basis and sound policy. To acquire that legal basis will require congressional intervention; however, Congress probably won’t act until after the next elections.

What do you think?

Regulating Tax Return Preparers: The Saga Continues

The IRS has opted not to petition the Supreme Court appealing various rulings striking down its efforts to require mandatory testing and continuing professional education for unlicensed tax preparers (Loving vs IRS). There is still a strong sentiment, however, for mandatory testing and continuing education as noted in the hearing describe below.

The Senate Finance Committee recently held a hearing on how to deal with incompetent and unethical tax return preparers. The committee heard testimony from numerous interested parties, each expressing their recommended solution to the problem. Following is a synopsis of the various recommendations:

• The IRS offered a volunteer form of certification.

• The Obama Administration’s 2015 budget includes a proposal to explicitly authorize the IRS to regulate all paid tax preparers.

• Loving vs IRS was successful in preventing the IRS from regulating paid tax preparers by requiring them to pass a competency test and take CPE.

• National Taxpayer Advocate Nina Olson supports requiring competency exams for tax preparers.

• Committee Chairman, Ron Wyden- (D-Ore,) touted his state’s tax preparer licensing standards.

• Janis Sallsbury, Chair of the Oregon Board of Tax Practitioners recommended that “Congress emulate Oregon’s regulation of tax return preparers and provide the IRS with the authority to require individuals to demonstrate minimum competency in tax return preparation, either by passage of a state board examination or by an IRS examination and to impose continuing education requirements after passing the examination.”

• Chi Chi Wu, a staff attorney for the National Consumer Law Center stated that the NCLC was in favor of the state licensing approach and they have developed a model act that states could use to implement such laws.

• Dan Alban, Attorney for the Institute for Justice who successfully sued the IRS in the Loving vs. IRS case, disagreed with the need to give the IRS the authority to re-impose the tax preparer licensing requirements. He recommended a voluntary certification program that would allow both consumers and preparers to decide if they value certification.

• John Barrick, an associate professor of accounting at Brigham Young University and a CPA, testified that return preparer regulation should be allowed if the costs do not outweigh the benefits.

The majority of the participants supported some form of mandatory competency testing for unlicensed tax preparers. It is interesting to note that Alban and the IRS both recommended voluntary certification. The majority of participants, however, supported mandatory testing for unlicensed tax preparers. 

Should all unlicensed paid tax return preparers be required to pass a competency exam and to take CPE, or are there other ways to ensure that preparers are competent to practice?

What do you think?

RTRP Solutions from Checkpoint Learning and Quickfinder

Robin Thompson, Shari Phelps, and Pam Schieffer provide a quick look at how Checkpoint Learning and Quickfinder have teamed up to provide tax reference and continuing education designed specifically for the new Registered Tax Return Preparer designation. Quickfinder offers quick reference handbooks in multiple formats (including on iPad and Android tablets) that include helpful information that RTRPs need to know specific to their new designation requirements. Checkpoint Learning provides an online CPE course package with CPE tracking designed for RTRPs, and a Quickfinder-branded downloadable trio of print-based self-study courses (with online grading) that exactly meet the annual continuing education requirements for RTRPs. Big savings are available with either option; take a look to learn more.

For more information, please see:
http://cl.thomsonreuters.com/CPESolutions/RTRP
and
http://www.quickfinder.com/tax_products/tax_preparation/1040-reg-tax-return-p...

Quickfinder and Checkpoint Learning are part of the Tax & Accounting business of Thomson Reuters.

Gear Up Fall CPE Conferences: What’s New

Robin Thompson and Kirk Langman, Operations Manager for Instructor-Led Training for Thomson Reuters Tax & Accounting, talk about Gear Up CPE Conferences, particularly Royal Flush and Magic Week fall CPE conferences. Hear about what’s new for fall 2012 and what makes these week-long CPE conference events so popular with tax and accounting professionals. 

Find out more at http://cl.thomsonreuters.com/GearUp/Conferences

Free Course Offer Code

Looking for your free course offer code? Thank you for visiting the CPE & Training Solutions Blog to unlock special offer code: FREEAUG12

Click this link for special offer directions and details!

RTRP Courses and CPE Tracking from Checkpoint Learning: A Video Update

Judy Young, Ken Koskay and Winford Paschall talk about the Registered Tax Return Preparer (RTRP) requirements and testing process, and new offerings from Checkpoint Learning. New CPE courses in multiple formats (webinar, online, self-study with online grading, live seminar) are available to prep for the IRS exam and to meet annual CPE requirements, and Checkpoint Learning's CPE compliance tracking for RTRPs provides e-alerts, automatic CPE certificate submission to the IRS, and more.

Find out more at http://cl.thomsonreuters.com/CPESolutions/TaxPreparers

Checkpoint Learning 2012 Courses: A Video Update

Robin Thompson and Ken Koskay, vice president for Learning Solutions in the Tax & Accounting business of Thomson Reuters, talk about the 70+ new Checkpoint Learning courses and webinars launching in 2012.

Find out more at http://cl.thomsonreuters.com/CPESolutions/NewCourses

Rules for Political Participation by Churches and Other Nonprofits

With the national and local elections process in full swing, political contributions and participation in the political process are regular topics on the evening news. The dramatic increase in the amount of money being donated to and spent by the national campaigns is staggering.

During the last major election, I wanted to be part of that process, so I donated ten dollars to one of the major parties. They took my ten dollars, added fifteen dollars to it from some other donor, and then spent the combined twenty-five dollars trying to get me to donate ten more dollars. That is the worst business model I have ever seen, but I guess it works on some folks.

My contribution was not tax deductible; however, it was legal. Donations to a political organization by churches and other nonprofit organizations (NPOs), on the other hand, are strictly prohibited by Internal Revenue Code Section 501 (c) 3.

The Code also prohibits churches and other NPOs from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Any church or other nonprofit organization violating this prohibition risks losing its tax-exempt status. The Internal Revenue Service does, however, provide resources to help these organizations understand the rules.

Actions Churches and Other NPOs May NOT Take

1. Endorse political candidates.
 2. Contribute to political candidates or political action committees.

3. Participate in fund-raising projects for political candidates.

4. Distribute a candidate’s political statements.

As part of its examination program, the IRS monitors whether organizations are complying with the prohibition. When the agency finds or is made aware of instances of noncompliance it may issue a warning letter or it may revoke the entity’s tax exempt status.

While the IRS has issued hundreds of warning letters intended to stop advocacy for political candidates, it has only revoked a church’s tax exempt status twice since the tax law was amended in 1954.

Certain activities or expenditures may not be prohibited depending on the facts and circumstances.

Actions Churches and Other NPOs May Take
1. Conduct non-partisan voter registration/education drives.

2. Host forums where all candidates are invited and treated impartially.

3. Rent a church or other NPO membership list (at market value) to a candidate.

4. Make voter’s guides available to members so long as the guides do not reflect a partiality which could be misinterpreted as an endorsement of a particular party or candidate.

Trivia
1. The first recorded tax exemption for churches occurred circa 312, when Constantine, Emperor of Rome granted the Christian church exemption from all taxation following his conversion to Christianity.

2. In 2010 the State of Oklahoma awarded tax-exempt status to a Satanist group called The Church of the IV Majesties.

When it comes to politics, churches and other nonprofit organizations have to walk a very fine line. While the prohibition for organizations does not apply to members, a member must be careful to inform an audience that he or she is speaking as a citizen and not on behalf of the organization.

Frequently Asked Questions About RTRP

Now that tax season is behind us and that last extension has been dropped in the mail it’s time to think about whether you or some of your staff need to take the new Registered Tax Return Preparers (RTRP) test. The test has been available since last November but the IRS and others recommended that you wait to take the test until after tax season. Following are some of the most frequently asked questions about the Registered Tax Return Preparer test.

1. What does the new IRS return preparer oversight program require?
The oversight program requires all paid tax return preparers to register with the IRS each year and have a Preparer Tax Identification Number (PTIN). Certain tax return preparers who prepare Form 1040 series returns must also pass a one-time competency test, a tax compliance check, and a suitability check.

2. Who must take the RTRP competency test?
All paid tax return preparers who prepare Form 1040 series returns, and are not CPAs, Attorneys, or Enrolled Agents, are required to take the test.

3. Can I take the test even if I’m not required to?
Yes. However, you must have a PTIN if you wish to take the test.

4. Is the test available in Spanish?
No. The test is currently available in English only and generally will be administered in a computer based-format.

5. How many questions are on the test and what is the minimum passing grade?
There are 120 questions in a combination of multiple choice and true or false formats. You will have two and a half hours to complete the test. A perfect score is 500 but you must score 350 (70%) or higher to pass the test.

6. Where do I go to take the test and is there a fee?
The test is administered by Prometric and can be taken at any one of its more than 260 sites throughout the U.S. The test fee is $116 and must be paid each time you take the test.

7. By what date must I pass the test?
Preparers must pass the competency test and a tax compliance chech by December 31, 2013.

8. Do I have to pass the test more than once?
No. Passing the test is a onetime requirement to become a RTRP.

9. Must RTRPs comply with any annual requirements?
Yes. Starting in 2012 you must complete 15 hours of continuing education each calendar year. The 15 hours must include two hours of ethics. three hours of federal tax law updates, and 10 hours of other federal tax law courses. These courses must be taken from an IRS-approved vendor.

10. Where can I find more general test information?
For more information on the testing requirements go to:
http://www.irs.gov/taxpros/article/0,,id=239683,00.html

RTRPs representation rights are limited to representation before certain IRS officers and employees and only in connection with returns they signed.

If you’re looking for an IRS-approved CE vendor with RTRP prep courses to help you pass the test and all the continuing education courses needed to stay current with the latest changes in federal tax law and fulfill the ethics requirement, then visit Checkpoint Learning.

RTRP Rules Challenged

The Arlington, Virginia-based Institute for Justice, on behalf of a couple of tax preparers, is challenging the Internal Revenue Service’s authority to regulate tax return preparers. The Institute plans to sue the IRS asking for an injunction against enforcement of the new Register Tax Return Preparer (RTRP) regulations. They claim that requiring tax preparers, who are not CPAs, Attorneys or Enrolled Agents, to pass a licensing examination (there is a fee of $116 to take the exam) and attend 15 hours of continuing education courses annually, will deprive them of their right to earn a living.

Well, I can tell you from personal experience: some of them need to be deprived.

When I was growing up, my dad was a struggling small business owner. He was one of those individuals who used an unregulated tax preparer. One year, the errors the preparer made on his return were so egregious that the IRS audited the return. Because of the nature of the errors, the agent went back and audited all open years. As a result my dad received a refund of over $1,000, which was a lot of money back in the 1960s, especially for someone like my dad who had struggled each year to pay those taxes.

There are three ways the group says these new regulations will negatively impact tax preparers and their clients:

1. It will put some tax return preparers out of business.

2. It could cause a financial hardship for their lower income clients resulting from the increased fees.

3. Their clients may have to find a new tax preparer.

My responses to the group’s allegations are as follows:

1. So be it. If they can’t pass a basic competency test they should not be preparing tax returns.

2. I don’t buy this. There are half a dozen or so entities that provide free tax return preparation, including the IRS’s Volunteer Income Tax Assistance (VITA) program. I realize that the free tax return preparation programs are primarily for the most basic tax returns, but if a return is more complex than a basic return you need the services of a qualified tax preparer. (See response 1 above.)

3. If they were using a qualified tax return preparer in the first place this would be a moot point, otherwise: See response 1 above.

What do you think?

RTRP Test Validation Concluded

The Internal Revenue Service has just announced that it has begun providing test results to tax return preparers who have taken the new return preparer competency test. Those who pass the test and a tax compliance check will be given a new designation: Registered Tax Return Preparer (RTRP).

Testing began in November 2011 and has been in a calibration phase since that time as the IRS validated the test questions and established the passing grade. The calibration phase has now ended. The test has a total of 120-question. A perfect score is 500. Preparers must score at least 350 (70%) in order to pass the exam. The test is part of a larger IRS effort to ensure competency and professional standards in the tax preparation industry. All RTRPs must also complete 15 hours of continuing education annually.

Although preparers have nearly two years to take the test (must pass the exam by December 31, 2013), the IRS encourages them to complete the requirement as soon as they can. Preparers with a testing requirement can schedule the test by accessing their PTIN account at IRS.gov/ptin. The test can be taken at more than 260 sites for a fee of $116. However, the IRS has announced that testing will be suspended for a two-week period beginning April 1 and resume on April 16, 2012. You can find more details about the test at IRS.gov/taxpros/tests.

If you're planning to take the test, check out the Registered Tax Return Preparers Competency Examination Prep Course from Gear Up, a one-day, comprehensive instructor-led course designed to provide you with the training you will need to pass the exam. Currently available this May or June in Arizona, California, Florida, Illinois, Oregon, and New Jersey; click to view more information or call 800.231.1860.

CPE and Me

I had a birthday this month. Now, I am not going to tell you how old I am, but it did remind me that, in addition to being one year older, my annual Continuing Professional Education (CPE) reporting deadline had arrived. I am licensed in a state that requires CPAs to report the number of hours of CPE completed in the twelve-month period ending on the last day of the month in which they were born. The requirement is usually stated in terms of minimum required number of hours of credit and specific requirements such as number of hours earned from technical and non-technical topics and ethics. Failure to complete the minimum hour requirement as well as the specific course requirements can result in suspension of your license to practice.

A summary of CPE reporting deadlines for the 50 states and 4 territories are as follows:
• 28 – December 31st.
• 12 – June 30th.
• 8 – Other
• 5 – Birth Month
• 1 - None

The Wisconsin state board does not require its CPAs to obtain CPE: however, most Wisconsin CPAs voluntarily take CPE in order to stay current with the ever changing accounting and tax rules and regulations.

Five states have birth month reporting periods. These are mainly the large states; California, New York, and Texas. Arizona and New Mexico have also adopted reporting based on the month you were born.

The majority of the states-(74%) have either June 30th or December 31st-as their reporting date.

Often reporting periods do not correspond to the license renewal date, so you need to be careful to complete the required number of hours of CPE within the renewal period. Also, limits on the number of hours of credit you may report for a specific type of CPE (self-study vs. instructor led or technical vs. non-technical) need to be carefully monitored so you do not run afoul of the requirements.

If you are licensed in only one state, keeping up with your CPE requirements may not be that challenging. However, if you are licensed in multiple states, it can become a daunting task. The good news is that there is help available. Thomson Reuters CE Tracking, available on Checkpoint Learning©, tracks over 70 organizations that regulate licensing and certification requirements, including all 50 states. Just follow the link for more information.

https://checkpointlearning.thomsonreuters.com//Courses/CpeTracking

Features of CE Tracking include:

• Automatic determination of compliance periods.
• Enforcement of limits/prohibitions on credits earned.
• Notification of rule updates and changes.
• Monthly e-mail reminders to keep you informed of your CE compliance status.

Check it out for yourself. It can save you time and ensure that you meet all of the continuing education requirements mandated by each of your licensing bodies.