Righteousness in Designation?
Friday I was interviewed and retained by a new client. This particular client has several issues that actually can fall in line with a great debate we have all been following.
First, a little background:
A young newly wedded (three years) couple has their tax return done by “pros” as they are not among those who follow the taxing world. We will call them Pat and Jody Taxpayer. Having just started their own Business they left HeRBert (the group who prepared their returns) for what to them was perceived as a tax professional. They retained a CPA to handle some general bookkeeping and complete tax returns.
Good choice?
Of course it is, “All but the militantly nefarious and hopelessly deluded concede that CPAs are experts at keeping books and records. There simply is no higher accounting “designation.” then CPA.
The CPA (Certified Public Accountant) maintained records by gaining access to Pat & Jody’s bank account using the online statements. The first tax season for this CPA came around and she completed the 2007 tax return. Another year passed, and she completed the 2008 return.
Several months ago, the IRS notified the Taxpayers that the 2007 return was under investigation. Seven lines on two different Schedule Cs were in Question.
Considering a CPA had prepared this return there should be no worries.
So how did I get this return?
When the time came for the audit with the “Tax Compliance Officer”, the CPA, had manufactured information to provide the IRS to validate two of the seven lines in question and did not show up to guide the Taxpayers through the 3 ½ hour long ordeal. Needless to say, the IRS found no substantial proof or validation for seven lines in question. P & J now are holding a bill from the IRS for over $10,000.00.
Not only are the taxpayers confused about what happened, but the “Compliance Officer” also looked at their 2008 return, they are about to undergo another audit.
“Because good accounting skills are a critical part of good tax preparation, CPAs are uniquely qualified to be tax preparers.”
So where is this CPA? Avoiding Pat and Jody.
This is a most uniquely “qualified” tax preparer?
I reviewed 2006 (again prepared by HeRBert – a fast food chain preparation service), 2007 and 2008 returns. (again, these two returns were prepared by the same “CPA”)
- 2006 had 6 errors resulting in a $213 refund to Pat and Judy (I can say this because I have already amended this return)
- 2007 has 21 errors - three missing forms (associated with errors) and if that wasn’t bad enough, 5 of the errors are mathematical.
“Good tax preparation is about numbers. It’s about keeping good books and records.
In short, it’s about good accounting.
In fact, what is a tax return if it’s not an accounting?”
Hummmmm
if anyone needs a definition to “accounting” I have a link to the right for Merriam-Webster Dictionary or you can click this.
Good thing it doesn’t suggest an ability to add or subtract.
Same for Accountant.
- 2008, well is just wrong. I say this because nothing changed from 2007 through 2008.
- 2007 consisted of
- 1040 Long Form
- 2 Schedule Cs
What the 2008 return consisted of was a 1040A – Short Form, nothing more.
My conclusion is this CPA stands proudly among those who are truly CPA tax professionals. You real CPAs who are tax pros, give her credibility she assuredly doesn’t need.
As for Jody and Pat, luckily they found a tax professional. I will help them through the amended returns, the audit up coming, and any and all IRS intervention that may come their way. If you wish to stay updated on their situation, I will create a blog page giving more detail information and will keep it updated.
However not all of you will see it this way. Why? Well, I am no longer a CPA. I am not an EA, nor am I an Attorney. What does this make me? I am an unenrolled preparer.
Unenrolled preparers, by definition, have no recognized credentials and are bound by no professional standards
And what are the unique qualifications of an unenrolled preparer?
Would someone please tell me?
Anyone?
The silence is deafening.
That’s because the answer is “none . . . nada . . . zero . . . zilch.”
The silence sir, is deafening because you are on your computer. But now, please, open your eyes fully, adjust your glasses, I want you to hear me plainly.
An unenrolled preparer is a unique person. Like a Lawyer, a CPA, or Doctor or any other profession, you are going to have unqualified hacks. My Credentials are useless in the taxing industry.
Or did you miss it?
The AICPA told a CPA/Tax Professional “We do not offer a credential in taxation. In general, our approach has been not to develop credential programs around areas for which the public already believes CPAs to ‘own’. In addition, we do not endorse a particular tax credential.”
An unenrolled preparer sees how others take advantage of the miss-conceptions of the designation and learns tax rules and regs to help people through what can be a very taxing time (no pun intended).
I question your thinking when you say a man with over 35 years in the tax preparation industry has no credibility. I only have 23 so I must not have any either?
Hummmm, let’s look at my background a bit:
a) A Masters in Accounting
b) Formally employed by this countries (at the time) Largest Accounting firms
c) Formally a CPA
d) 23 years preparing returns for taxpayers
Of the four listed in my mind, only qualifies me to call myself a tax professional. I can assure you it isn’t one of the top three.
“There simply is no higher accounting designation.”
Thus, if the Internal Revenue Code imposes an affirmative duty on taxpayers to maintain good books and records, doesn’t that alone explain why CPAs are uniquely qualified to prepare tax returns and why many CPAs are drawn to the field of tax preparation?
Of course it does.”
You Pompous arrogant ass. Is your head so high in the sky that you are not getting enough oxygen?
True enough, the IRC does affirm duty to taxpayers to maintain good and accurate records. Alone that tells me (a former CPA) should seek advice from a CPA on how to keep those records not how or where to put them on a tax return.
It is my opinion that a good majority of the CPAs that are drawn to taxation and preparation do so for the money.
(Not to get off subject, but are you actually a licensed Tax Attorney, and a CPA? I know a few Lawyers and I’ll have to ask, to be sure, but I think like the AICP, there is nothing out there for Lawyers to hold actual “tax” credentials. If I am wrong please correct me, do you have some designation that says you’re a Tax Lawyer? If so, what is it?
As for not being bound by professional standards, I find it hard to understand why I have to point out to a designated pro that we (The Unenrolled prepares) are bound by the same rules in Circular 230 as you are. Maybe you should read it some time.
A while back, I post Who is: a post that defines different titles. If you want to see the entire post please click on the link Who is: Below is a brief recap:
A Tax Attorney - Typically large and even small businesses will meet with a tax attorney once every quarter or once a year to ensure that they are making the best possible business choices with regards to investments and tax issues. Since the taxation, laws change constantly.
A Bookkeeper – is responsible for keeping accurate, up-to-date business records for proper cash flow management, balance sheet preparation, and developing expansion and investment plans.
Accountants – keep track of a company’s money.
Enrolled Agent – is a federally authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audits, collections, and appeals.
Tax Preparer – an individual who prepares tax returns.
Other post from the “taxguy” blog that may be related to the taxpayer issue mentioned in this post.
Choosing the Right Representative
5 Worst Things You Can Do if You Get an IRS Collection Notice a Guest post from Peter Pappas. . .
How to Avoid IRS Penalties and Interest
Picking A CPA With Too Much. . .
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Bruce-
Thanks for this post and “coming to my defense” as it were in regard to the uncalled for, unfounded and just plain nasty comments about my personal qualifications and character and those of the hundreds of thousands of other qualified independent “unenrolled preparers” by a fellow tax blogger to whom we had both been supportive in the past.
I read with interest your tale of the the taxpayers screwed and abandoned by a CPA. It is certainly not a unique tale – as there are many other similar tales out there. The taxpayers were lucky to find a true tax professional to fix the mess caused by the CPA they assumed to be an expert because of the general public misconception.
They relied on initials alone and picked the wrong CPA – they assumed all CPAs are tax experts. There are certainly CPAs out there who are indeed tax experts and would have prepared the returns in question properly – but not because they are CPAs but because they have chosen to specialize in taxes and are appropriately educated and experienced.
While tax returns deal in numbers, the practice of tax is in reality the study and application of a specialized Law (the Tax Code) and not Accounting. Just because a person can add and subtract, or is highly proficient in keeping books and preparing financial statements (as one would expect a CPA to be), does not mean he/she knows a thing about tax law. Because numbers are involved many accountants are drawn into tax practice.
Your post affirms what I have been saying all along – no set of initials, other than EA (for Enrolled Agent), after a person’s name guarantees, or should automatically suggest, that the person is proficient or current or even competent in the specialized area of applying and interpreting the US Tax Code in the preparation of 1040s.
As you point out, an “unenrolled preparer” is by definition a tax preparer. A CPA is by definition a licensed accountant who is authorized to certify an audit of financial statements. A CPA is not by definition a tax preparer. Therefore it is safe to assume that on the surface an unenrolled preparer is more likely to prepare an accurate tax return than a CPA, without any additional knowledge about either individual person.
And thank you for pointing out that unenrolled preparers are also covered by the professional standards included in IRS CIrcular 230.
One word of warning – be prepared for public rants and personal attacks by our “colleague”!
TWTP
Robert,
The comparison is between CPA preparers and unenrolled preparers.
Not between non-preparer CPAs and unenrolled preparers.
Of course an unenrolled preparer who has prepared thousands of accurate returns is presumptively a better preparer (although never a more credentialled one) than a CPA who has never prepared one.
Hypothetically, a Doctor imposter who had performed thousands of successful surgeries is probably better at it than a real Doctor who had not.
It proves nothing and it doesn’t address the argument I am making.
Finally, “unenrolled preparer” is a catch all term for anyone who prepares or has ever prepared a return and who is not either a CPA, lawyer or IRS Enrolled Agent.
In short, it is negative, or non-designation!
It means the preparer has not demonstrated to any regulating body his ability to preparer tax returns.
PP-
You fool! My comments have not been about CPA-preparer vs unenrolled preparer. It has been that the mere existence of the initials CPA after one’s name does not automatically mean that person is a tax expert. Did you not even read my posts?
Although I have found more errors on tax returns made by alleged “CPA-preparers” than even by Henry and Richard. Bruce’s case history is a prime example of an incompetent alleged “CPA-preparer”.
An unenrolled preparer means that the person did not want to become a CPA – why would someone whose profession is the preparing of tax returns want to go through the extensive process to become a CPA when it means absolutely nothing in terms of taxes (and why would one want to become a CPA if they were not planning to make a career in auditing – no other purpose) – or did not want to become an Enrolled Agent becuase the person did not want to “practice” before the IRS. There are those people who like to accumulate “initials” unnecessarily because it gives them a feeling of superiority.
If I am shown three individuals and told that one is a CPA, one is an EA and one is an unenrolled preparer and nothing else about the three, and I am told my life depends on choosing the person who will prepare an accurate tax return, I will obviously choose the EA first, the unenrolled preparer second and the CPA third.
An EA is obviously a tax expert, as per an initial test in taxation and continuing education in taxation. No question there – it is a no-brainer.
As I have said an unenrolled agent is by definition a tax preparer while a CPA (remember – I have been told nothing other than the person is a CPA) is not by definition a tax preparer – so one would obviously pick as 2nd choice the one person who they are sure has had experience in 1040s.
I do not know how to put it any simpler so you can understand. The major issue in discussion is that the public has a misconception (and the AICPA apparently is well aware and encourages it) that a CPA is automatically a tax expert by virtue of the initials alone.
Obviously a CPA who is educated and experienced in 1040 preparation is at least just as good as a non-CPA (unenrolled preparer or non-certified account) who is educated and experienced in 1040 preparation. Who is better is a factor of the extent of education and experience of each individual – and has absolutely nothing whatsoever to do with the initials CPA.
All this talk about “credentials”. All the CPA “credential” means is that you are allowed by law and regulation to certify the audit of financial statements. Period. A CPA “credential” has absolutely nothing whatsoever to do with 1040 preparation.
I am getting sick of repeating myself. I hope you will get off your high horse and stop making nasty, uncalled for and unfounded personal attacks against me and other unenrolled preparers. Move on, for God’s sake!
TWTP
Robert,
I am glad to see that you are backing off your original obviously absurd contention that an unenrolled preparer is presumptively superior to the CPA preparer.
And if you don’t remember making that contention, I would be more than happy to jog your memory by publishing it a fourth time?
It is true that an unenrolled preparer might mean that the person did not want to become a CPA.
Then again it might mean that he was not qualified to become a CPA.
Then again again, it might mean he tried to become a CPA and failed.
All 3 are equally plausible reasons that an unenrolled preparer is not a CPA.
You call me a “fool,” a “low class individual” and accuse me of lying to people just to get more fees and then have the audacity to give me this lecture on nastiness and personal attacks:
“I hope you will get off your high horse and stop making nasty, uncalled and unfounded personal attacks against me and other unenrolled preparers.”
That takes gumption.
And as for me “moving on,” I will not.
As Nina Olson, Doug Shulman and other tax professionals obviously recognize, this issue is too important to ignore.
There are simply too many wholly unqualified and unscrupulous unlicensed preparers out there and something must be done about it.
Part of the problem is that people like you misinform the public that a person who calls himself a tax preparer but has not been required to demonstrate that he has received any tax law or accounting training whatsoever is someone more qualified than those who have received that training.
Simply astounding.
Even CPAs who have never prepared a tax return in their lives have at least had to demonstrate to some regulatory body that they can do simple math.
Unenrolled agents have never had to demonstrate anything to anyone, ever!
I want to know if any talk, anywhere has been made as to making sure ALL IRS agents from telephone agents giving tax answers over the phone to even the HEAD of the IRS – get licensed also.
On another point, I still stand by my personal opinion that all of this will eventually lead, in a future space and time, to basically having a small elite group of tax preparers (EA’s) in each state and that no one will be able to prepare their own taxes but will have to BY LAW go to a special licensed IRS controlled tax preparer or have the IRS do it…
As an added blip to my above post – how will all this licensing stuff play out as pertaining to all them CPA’s, McHenrys and the statue crew, cheapo online any form any color for $19.95 set, etc who ship peoples taxes overseas to tax farms in India and such for preparing – will all that be disallowed or will all them in foreign countries get licensing also – I doubt it…
I know a few CPA’s who send their clients tax forms and very personal records overseas – some Indian prepares it for $20, send it back and the CPA e-files it and charges the client $400… and it happens more than people know…
Just my 2 cents on all this insanity…
Flat 16% tax for all – no deductions, no refundable credits, no interest deductions, no EIC, just proper and basic business expenses and maybe a low income guideline.