Wednesday, September 23, 2009

Tax Preparer Registration: An Irresistable Force?

CPA Allen Bostrom of Salt Lake City comtemplates registeration of tax preparers from the perspectives of California's and Oregon's experience. California permits non-CPAs, EAs and attorneys to register as "non-exempt" tax preparers for a mere $2 annually BUT requires "non-exempt" preparers to take 60 hours of continuing education per year and enforces this requirement with fines of up to $2,500 per year. Oregon started the licensure program 35 years ago. At the time, some accountants were "grandfathered" in--but most Oregon accountants appear to believe that this was a mistake. Oregon also exempts CPAs, EAs and attorneys with "non-exempt" preparers required to take 80 hours of education to prepare for the exam and 30 annual hours of CPE after licensure. Oregon preparers have two options: a licensed tax preparer takes an easier exam but must have 2 years of experience while a licensed tax consultant skips the experience requirement but takes a tougher exam.

After considering these experiences, Bostrom recommends a two-step process: [1] require preparers, whether CPAs, EAs, attorneys or otherwise, to register. Little or no restrictions on who registers; nominal registration fees and at least 20 hours of continuing education (five hours per year on tax updates, five hours first year on ethics/professional responsibilities) and annual registration renewal. [2] have the IRS evaluate the competence and ethical performance of preparers, both exempt and nonexempt, during the next three years. Bostrom does NOT support generalized testing of preparers nor mandated specific continuing education until the three year period is complete.

Bostrom's idea is one worth serious consideration; though no preparer group will be completely happy with it. "Nonexempt" preparers may feel like they are being singled out in the early years, while CPAs and attorney's are likely to balk at the idea that they may need to be retested after passing the CPA exam or bar respectively. One adjustment that I would recommend off the top--allow the State Board of Accountancy or State Bar to handle the registration process so that a new bureaucracy is not needed. The state board can handle CPAs and "nonexempts" while the State Bar handles attorneys and EAs (or switch for the EAs and "nonexempts").


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