Originally published on Forbes.com.
So this weeks aggravation is that the AICPA (American Institute of Certified Public Accountants) is wasting my dues money again. The DC Circuit has breathed life into a pointless lawsuit against the IRS that was dismissed last year. The case really pains me, because my natural team spirit makes me want to root for the AICPA. As Edmund Burke wrote:
To be attached to the subdivision, to love the little platoon we belong to in society, is the first principle (the germ as it were) of public affections. It is the first link in the series by which we proceed towards a love to our country, and to mankind.
The lawsuit is about a program that the IRS started. Everybody who prepares tax returns for compensation is supposed to have a PTIN. Back in the day a PTIN was optional. The alternative was to put your social security number in the paid preparer section of the return. Being reckless, irresponsible and lazy, I took the latter course, reasoning (or rationalizing) that anybody who stumbled on a return that I had signed as preparer would be more interested in stealing my clients identity than mine. Now you need a PTIN regardless.
Annual Filing Season Program Participants
The IRS had wanted to put some requirements around who could get a PTIN requiring an exam and continuing professional education for those without an existing recognized credential, but a lawsuit struck that down. So instead, the agency started an optional program – the Annual Filing Season Record of Completion. PTIN holders who jumped through the appropriate hoops would get one of those suckers (I don’t know whether they are suitable for framing) and, here is the big deal, be listed in this database along with the PTIN holders who are qualified to represent taxpayers before the IRS. That would be CPAs, attorneys, enrolled agents, enrolled actuaries and enrolled retirement plan agents.
Essentially the AICPA is objecting to letting the “Annual Filing Season Program Participants” be on the same list with CPAs and attorneys, who are not actually required to know all that much about taxes to maintain their licenses and the enrolled agents who do have to pass a test about federal taxes. AICPA is concerned that the “public” might get confused.
The case was kicked out by the District Court for lack of standing. Standing is a very lawyerly concept. The essence of it is that you can’t go to court just because you don’t like an agency action or think it is a bad idea. For example, the dubious constitutionality of the unlimited tax exclusion for housing allowances paid to “ministers of the gospel” is protected from legal assault by the Freedom From Religion Foundation by the concept of standing.
Standing
The appellate court, however, finds that the AICPA does have standing and the reason is pretty embarrassing.
The Institute alleges—and we must accept as true for purposes of assessing its standing—that this will “dilute[] the value of a CPA’s credential in the market for tax-return-preparer services’ and permit unenrolled preparers to more effectively compete with and take business away from presumably higher-priced CPAs.
Seeking to escape this logic, the IRS argues that the Program will help unenrolled preparers compete only with other unaffiliated unenrolled preparers who decline to participate, rather than with the CPAs and CPA firms that comprise the Institute’s membership. The Institute responds with two arguments: (1) that consumers will be confused about the meaning of the Record of Completion, believing either that it conveys IRS endorsement of the preparer or that it represents a superior credential to a CPA license; and (2) that even if the Program causes no confusion, it still causes competitive harm by “dilut the value of a CPA’s credential in the market for tax-return-preparer services’ and by making it more difficult for unenrolled preparers employed by the Institute’s members to secure business.
Seriously? You are really worried about this. The part that I found really interesting was the mention of “making it more difficult for unenrolled preparers employed by the Insitute’s members to secure business”.
Who are they you might wonder? Well here is the thing. If you go to a CPA firm to have your return prepared, the bigger the firm, the less likely it is that your return will actually be prepared by a CPA. There is a tremendous amount of pressure to “push work down” to make the leverage model work. It used to make sense for public accounting to be a pyramid with an up or out structure. The problem is that much of the grunt work done by the bottom tier of the pyramid back in the day – depreciation schedules for example – is entirely automated as is all the grunt work in preparing returns. Management of large CPA firms remains attached to the leverage model. The other thing that I find most disturbing is that the preferred method for getting the actual work done is by using people in India.
My suspicion is that the AICPA is thinking more about the inconvenience that might be created if the “public” started asking if the people actually doing their returns have any credential at all. CPAs who actually prepare returns will not be troubled at all by this. It is CPAs who know how to play golf and sip single malt scotch who want the actual work to be done in South Asia for a pittance that might be worried.
If Bernie Sanders has only two words for you they might be “[ope Francis” or the “Koch Brothers”, but the two words are most likely “Middle Class”. Bernie is not promising a three page Carly Fiorina Tax Code that will require returns filled out on Ted Cruz postcards. Something he might want to consider to protect the middle class is to require that American tax returns that don’t involve foreign operation be prepared in America.
How Many Tax Bloggers In The Directory?
You can find me and Joe Kristan and Tony Nitti in the directory, but there are many notables in the tax blogosphere who will not show up. Off hand I’m thinking of some attorneys who have a credential but have no reason to get a PTIN. One fellow who does need a PTIN, whom you will not find is Robert Flach. I asked him what was holding him back from becoming a “participant”.
From my personal point of view – since I no longer seek nor accept new 1040 clients – I do not need, or for that matter want, to be listed in any database that is available for taxpayers looking for a tax preparer. I want less clients, not more.Even if I was looking for new 1040 clients, I do not think the database will get much use. Taxpayers are not looking for “IRS-approved” tax preparers – they want tax preparers who will fight the IRS for them if necessary. While appearance in the database does not necessarily infer IRS approval, I think taxpayers will think it does.
Bob has some choice comments on the lawsuit.
The bottom line – the AICPA fears that any government, or other, credential or designation that identifies a person’s competence and currency in 1040 preparation will take business away from CPAs. Duh! Of course it will – and it should! The current erroneously presumed credentials of CPAs in the market for tax-return-preparer services should be diluted, as they are unrealistic. Qualified unenrolled preparers should be able to more effectively compete with the urban tax myth that CPAs are automatically 1040 experts. This does not “distort the competitive marketplace”, but instead improves the marketplace by providing taxpayers looking for a qualified tax preparer more information to help them make an informed decision.