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Slow but trend - Conn adds regulations for unenrolled preparers


easytax

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I agree with having regulations on services for preparers --- HOWEVER -- feel they should be across board without the Attorney, CPA, etc. exemptions. If tax preparation is what is being regulated, then ALL should be subject.  A plumber or electrician are all professional as are doctors, etc. / but / should they do taxes, maybe not (unless schooled, etc. in taxes) ---- same as lawyers, CPA's, etc. who know (possibly) their area of law or business (but not (or even most) do actually know taxes), therefore until shown to KNOW taxes, all should adhere to regulation requirements for preparation, etc.     

BY the way, surprised that more states do not regulate this as it makes money, jobs for them, etc...

---------------------------------------------------------------------------------- following from the "tax letter' ------------------------------

Add Conn. to the small list of states that regulate unenrolled tax preparers.

A new law requires that, starting in 2019, preparers who aren’t lawyers, CPAs

or enrolled agents, or who don’t meet one of the other exemptions, apply for a permit

from the state and pay an annual fee. And beginning in 2020, applicants for permits

must provide proof of completion of IRS’s voluntary annual filing season program.

The state will include the names of licensed preparers in a public directory.

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EAs are already stiffly regulated by the IRS.  They had to pass a tough exam and are subject to background checks and continuing ed requirements that include yearly ethics.  Nothing the states can do to top that except require CEs or a competence exam in state taxation like CA does.  CPAs are regulated by their state accountancy boards, which also require CEs, ethics, and background checks.  The CPA exam has one part devoted to taxation, so they had to study up for that.  Most CPAs specialize.  I meet many of them who do taxes at CE seminars.  I find that many don't do taxes, or just the do returns for the businesses they handle and perhaps the individual owners of those businesses.  I work in a CPA firm, and we have quite a few clients who are CPAs.

I wonder about attorneys.  They have to take bar exams and are regulated by their state bars and I assume have CE requirements.  Do they ever have to study taxes?  I have quite a few attorneys who refer estate and trust tax filings to me.  They probably charge the client twice what I charge them, but the fact is they are not attempting these returns in house.  So at least from my experience, CPAs and attorneys are professionals and seem to know what they don't know.

CTs new regulations include a fee of $100 for the initial application and $50 every other year after that.  At least there are some competency requirements (borrowed for free from IRS).  When NY first began regulating preparers, there were no requirements outside of paying a hefty fee.

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54 minutes ago, easytax said:

I agree with having regulations on services for preparers --- HOWEVER -- feel they should be across board without the Attorney, CPA, etc. exemptions. If tax preparation is what is being regulated, then ALL should be subject...

Gimme a break, Easy -- they'd have to pull a gun to make me take that EA test again.  As anybody checking my posts could probably attest, I must've passed it by the skin of my teeth. The only less knowledgeable person there was the IRS test monitor who held a 1040-EZ booklet up in her hand and said "If you pass the test you will be fully able to complete this form." Have some compassion, comrade-in-accounting (we've suffered enough :rolleyes:).

Sara - you're right on the money about attorneys - many have called me and most don't know jack about taxes.  And as for their fees outranking ours, well...many years ago I clerked for a rich plantation owner - he had a local attorney on retainer (who charged extra for special jobs). The owner died and I took his papers to the lawyer. On his desk was a paperback book (about $3 at the time) entitled "How to Do an Estate Tax Return."  When I paid the bills next month, the lawyer's invoice" stated "Preparation of Estate Tax Return - $5,000."

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Agree with the EA (reason not mentioned initially (did have "etc." but did not mean EA)) having no need to be further regulated by IRS. After all, their designation is/was for taxes specifically. That is partly the point --- being a bit more specific with CPA's and a LOT MORE specific with lawyers. CPA's may initially study taxes, with attorney's having a "passing mention" of them somewhere around law school BUT neither have specific tax CE requirements (on CPA's - to my limited knowledge; with attorney's definite knowledge no tax CE's required). All are generalist (so to speak) CE requirements.  ---- The point (again - from my view) is that just because one is a CPA or an attorney - does not mean they know taxes and there should be some sort of regulation; just as there definitely should be on someone like myself who is not a CPA or attorney. 

I do not make this comment lightly as I am a "personal responsibility" person and believe there should be less government but government with real laws (with 'real" teeth) rather than currently done.      (This is not meant politically -- but if perceived that way (moderators, please remove this section of the comment if so)).

By the way, attorney's (under the bar - I believe) do have an ethical section where they should NOT do something they do not know how to do. Problem(S) are that they (the attorney) get to choose what they believe they "know" and are regulated by "the bar" (other attorney's) who only act when specifically required to and know of the problem about that [particular attorney (who sues their attorney ---- really? problem is not fully publically known).       The degree is a "generalist" with just like most other things, subject to additional learning, etc.. Think surgeon vs. doctor; accountant vs. CPA and so on. The additional "learning" makes the difference --- what harm in "proving/regulating" that that "learning" has been fulfilled? (and not at the clients/customers expense).

The decision to REQUIRE financial advisors to act in the "best interest" of the client and not just offer/have "suitable for" clients materials, etc. was a long time coming. This is a form of good government ---- but took numerous years with many of the "advisors" fighting all the way.

We ourselves may be ethical and so on BUT is everyone? (note: even with good ethics, we sometimes make bad decisions (I know from personal knowledge) That is the reason for any regulation concerning the "needs" of the public in something such as taxes, etc..

Boy, I LOVE the 'etc." :lol:, do you?    Thank you for allowing me to rant --- please continue having a GREAT summer and an even better "season" in our chosen profession.

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Okay, thanks for clearing that up.  But I have to sort of disagree with you about the CPAs.  I'm no authority and hail from a rural area, but I cannot remember ever meeting a CPA (at seminars or on message boards and such) who did not deal with taxes.  I tend to think the vast majority do taxes.  And if I ever need to ask something tax-related that's over my head, a CPA I know is the first guy I think of calling - he hasn't not known anything asked and those killer multi-part tests they take command respect. 

This is only anecdotal of course, but while I'm sure there are CPAs (probably in large metro areas) that have non-tax practices exclusively, it just seems common sense to me that most would practice taxation (it's where the money is).

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Many years ago my first job after graduating from college, was on the audit staff of a national accounting firm and I did not do any taxes.

In my office the audit staff was triple the size of the tax staff and this was in a city of about 120,000.

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4 minutes ago, cbslee said:

Many years ago my first job after graduating from college, was on the audit staff of a national accounting firm and I did not do any taxes.

In my office the audit staff was triple the size of the tax staff and this was in a city of about 120,000.

How did you become a CPA without having any experience in tax?  That is one of the requirements, to have a certain % of time devoted to the area of tax.  Did you gain your experience elsewhere after that?

 

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One of the parts of the four-part CPA exam is devoted to taxes.  There are many out in left field questions, just like the SEE, so they really do have to study tax.  Once they pass they become more specialized.  Many CPAs work in the corporate world and never touch a tax return.  I too know several who mostly do audit and attest functions, mainly for cities, municipalities, and corps (places that have to be audited annually).  THAT is where the money is!  The CPAs Black Bart is meeting are at tax seminars or on tax blogs--naturally those are the ones who do tax.

As for attorneys, if anyone followed the link I posted under the "don't take the bait" thread, the free listing of PTIN holders includes credentials.  I was surprised at the number of attorneys who have PTINs.  Guess those are the ones who do taxes, but I doubt any concentrate on individuals. Even entities require accounting, and no one would want to pay $400-500 an hour for write up work.  Most likely they only do estates and trusts.  Has anyone ever had a new client whose former preparer was an attorney?

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To add to what is required to become a CPA and maintain the certificate, one must have a college degree that includes courses specifically on taxes, then the exam itself where many candidates will utilize a review course to prepare that will also include extensive tax-related study, and then must also have work experience that again, surprise(!), includes taxes.

I don't know about other states, but when I earned my certificate a successful candidate had to have two years work experience in public accounting with certain percentages of that in each of the areas of tax, accounting and auditing, which the employer had to certify in writing to the State Board of Accountancy.  Please also keep in mind that we are also required to have CPE to maintain that certificate with credits in tax and ethics. I don't know about the courses anyone else takes, but the ones I take are eligible for credits for both CPAs and EAs, and ARE accepted by the IRS to satisfy their requirements, so I really don't want to hear about our courses being more "generalist", whatever that meant.

Also when I said work experience required for me was two years, other states around me had either a one year requirement or none (!) and the successful candidate could hang out a shingle in short order.  Now my state and those contiguous appear to be one year, and all have increased and equalized the # of college credits required to be eligible as well. My last year of college I worked full time in a CPA firm as a staff accountant in the tax dept, and so by the time I received my certificate I had 3 full tax seasons plus the rest of those years of off-season work to my credit.

I am curious if the EA requires any work experience? Any hands-on at all?  Shouldn't that also be considered a valuable requirement toward improving proficiency and to help protect the public from unskilled preparers. I've known people that were very good at taking tests but couldn't apply that technical knowledge once on the job, so I think that the work requirement is a fairly important one in order to show some level of proficiency beyond taking these tests.

I will also say that, at a minimum, perhaps a course in bookkeeping or accounting should also be required study before any preparer be allowed to offer work on business returns for clients, because I've seen plenty of questions over the years from preparers with all sorts of fancy letters after their names that were clueless on how to balance a set of books, or how a balance sheet works, or how these relate to the business return, or how to handle a set of books prepared on a method of accounting other than tax basis and where to report these differences when it comes to preparing the returns for these entities.

Please also consider that some of the training, experience, testing, and CPE that we CPAs devote to the accounting side of the practice also help us in our work with our business clients, many times whose engagement is, in large part, tax-related work, and we specifically have to advise those accounting clients on tax related issues. 

Of course, there are the good, bad, ugly, and unscrupulous and unethical preparers no matter what designation that no amount of testing, CPE, or regulation will "cure" if that person is determined to work outside of the requirements.

As for the attorneys, they practice law, but the ones around here that I refer to and that call themselves tax attorneys or that have specialized in tax and estate planning have their CPA cert or have a MST in addition to the J.D.  I've sat through CPE courses that were taught by local tax attorneys, and I've attended some advanced-level courses that were filled with attorneys practicing in the area of tax and not too many CPAs present. The latest one was an advanced class on the intracacies of structuring sec 1031 exchanges. Our state is really tiny, so anyone that's been in practice any amount of times knows who each other are.

Sorry if that sounds snarky, but I get tired of hearing that CPAs aren't as knowledgeable or as proficient as EAs, especially when I read some of the erroneous comments that were made above.

/rant

Edited by jklcpa
added more about attorneys
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4 hours ago, SaraEA said:

...Many CPAs...mostly do audit and attest functions, mainly for cities, municipalities, and corps (places that have to be audited annually).  THAT is where the money is!... 

I'm not so sure of that.  I used to work for a CPA who audited government water and sewer operations and he said that while it paid well, the excessive amount of government red tape ate up much more time and profit than he could have made doing tax work for private enterprise.  Only that man's opinion, of course; and you have yours.

4 hours ago, SaraEA said:

...The CPAs Black Bart is meeting are at tax seminars or on tax blogs--naturally those are the ones who do tax...

True; I hadn't thought of that, although I'd still like to see a survey of percentages by the types of work they do. 

Just a note, but I imagine that most practitioners/preparers of whatever title or classification, registered or not, get sick of people asking, "What do you do after tax season?" 

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4 hours ago, SaraEA said:

...The CPAs Black Bart is meeting are at tax seminars or on tax blogs--naturally those are the ones who do tax...

True; I hadn't thought of that, although I'd still like to see a survey of percentages by the types of work they do. 

 

All practicing CPAs have to sit through the same hours and in the same classifications whether they are in the audit or tax depts, at least in this state. Those not in public practice, or those retired but still maintaining the certificate but out of practice, have a different level of required credits.

Frankly, I'm already bored with the ethics classes that I take every 2 years. I've taken from all the major vendors and done it self-study too, and it hasn't changed, and I'm not learning anything new. I think it's a waste of my time to take the exact same class over and over so frequently.

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4 hours ago, SaraEA said:

...Many CPAs...mostly do audit and attest functions, mainly for cities, municipalities, and corps (places that have to be audited annually).  THAT is where the money is!... 

I'm not so sure of that.  I used to work for a CPA who audited government water and sewer operations and he said that while it paid well, the excessive amount of government red tape ate up much more time and profit than he could have made doing tax work for private enterprise.  Only that man's opinion, of course; and you have yours.

I'll lean toward agreement with this somewhat.  Once a CPA takes on audit and attest engagements, and if a member of the AICPA or if the state requires it for licensure, we are required to have peer review every few years, and the level of that inspection is dictated by the types of engagements we perform. I don't do any audits, but I do have review work, and so I'm required to have a peer review that will cost me probably around $1,000 this year for the privilege of generating that work, and that is the barest minimum fee because I'm a solo. The fee is based on the type of work AND the # of professionals in the firm, and it is much more expensive if having employees, and much greater again if the firm performs any audits. 

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JKLCPA,  it did not seem as a "rant", just more of your educating people like me as to facts. Already learned here is to not combine classifications when describing opinions. A lot was learned  on CPA requirements (again, as stated, I had limited knowledge on CPA'S, just from those I ran into). With what was shared and the fact that CE'S for CPA'S do require specifically ongoing tax updates /// I have added CPA'S to my " good list" like the EA'S/// the world is safer again. On attorney's there is significant knowledge on requirements and activities (predominately criminal, some civil and administrative).

It even helps the point - if they have been trained in tax and ongoing updates are required (tax CE'S , etc.) the regulation might be lessoned for them from the IRS. The attorney's you mention even went for tax training and could come under the "less regulation" from IRS // BUT // still should NOT be allowed (my opinion) to be unregulated "tax wise" just because they took law training (not tax training). That is what was meant by "generalist" (here) - just because you know something - that person can automatically do unrelated things. To me, that is similar to allowing an engineer to do surgery or a drug company CEO to choose medicines for me. They all have their skills, training and such --- BUT -- those skills do not automatically transfer to "other" professions.

Posts here educate (please do NOT stop - rant if needed (it opens discussions)). Sharing facts and knowledge help those willing to think, to learn more, reevaluate or reconfirm their opinions. After all, our knowledge is from those we trust (people) and there is nothing wrong with "fact checking" as people can/do pick up erroneous conceptions and "pass them on". 

 

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Thanks, easytax, for reclassifying at least some CPA's. Generally the requirements for a license are similar across the states but not identical.  In Ohio, where I passed in 1993 (Can't Pass Again test), one needed just 4 years of college with appropriate courses, 24 semester hours in recognized accounting courses or completed examination demonstrating equivalency plus 2 years of public accounting experience or a master's in accounting or business admin with a minimum of 6 semester hours of recognized graduate level accounting courses plus one year of public accounting experience. Currently a master's degree or 5 years is required, I believe, by all states.

We also have a 120 hour CPE requirement over 3 years with a minimum of 20 hours annually (no packing the last year).  If one performs tax work, 24 hours of taxation are required; if accounting and auditing, 24 hours of A&A are required.  With either, 3 hours of Ethics are required.  All CPE must be accredited by NASBA and certificates presented to the board every 3 years.  Any attest work (compilation, review, or audit) requires peer review. 

Even retired CPA's (less than 1000 hours annually, such as tax season) must meet the CPE requirement so I take as many online freebies as possible.  Thankfully many are now available.  I do take at least 8 hours annually in a classroom setting with the new regs, etc. to have an opportunity to meet with colleagues.

I am biased, admittedly, but think CPA's do know a lot and those who specialize in tax do so because they love it and love learning about it.  My MBA is with a taxation specialty and my favorite course was learning about tax court.

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On 7/16/2017 at 1:17 AM, jklcpa said:

Frankly, I'm already bored with the ethics classes that I take every 2 years.

And frankly if one is NOT ethical, it's really easy to snooze through a class and get nothing - or give (untrue-for-you) correct answers on a test.  

The *only* ethics that has been useful for me is the UMass Tax School ethics.  The guy leading it is great and gets a group discussion going around grey areas and how clients can gradually sucker a preparer into those grey areas - usually NOT with bad intentions.  Not sure I learned anything, really - but at least it was interesting!  I *detest* those "ethics" presentations that start out assuming everyone there commits (or wants to commit) extensive tax fraud daily.

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5 hours ago, Catherine said:

And frankly if one is NOT ethical, it's really easy to snooze through a class and get nothing - or give (untrue-for-you) correct answers on a test.  

 

If it weren't for those ethics courses I would lie, cheat and steal--and claim an EIC on every return.  But after taking ethics courses, I now know that isn't ethical

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You CPAs have it easy when it comes to ethics.  EAs have to take 2 hours EVERY YEAR.  Gets old fast.  The best I've taken was one like Catherine had that was a discussion of real-life situations and another taught by an IRS agent (who started off saying he knew he was "preaching to the choir").  Worst I had was a video presentation of Karen Hawkins reading Circular 230 to us for two hours.  Talk about dozing off.......zzzz

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Thanks, SaraEA, for qualifying what we have 'easy.'  The catch in Ohio is that we have to take a specific ethics course, not just any.  And what comes prior to the ethics courses throughout our careers is not so easy hence the Can't Pass Again designation, at least for me!  When I took the exam, it was 2 1/2 days to cover all parts at once.  Now candidates can take one part at a time online.  I understand it is more challenging now but to have to know it all (Auditing, Business Law, Accounting Theory and Accounting Practice) and spit it out in 2 1/2 days is something I really never want to do again.

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I support what Margaret CPA in Ohio said.

I'm glad to hear SaraEa thinks we CPAs have it easy.

Little does she know that CPAs in New York must complete 4 hours of Ethics every triennial 3-year licensing period and it must be approved by the State Board of Accountancy, not the IRS. And the courses sponsored by the CPA professional associations usually, not always, focus on auditing issues of CPAs who perform reviews and audits, and claims issues of clients who sue accountants.

As well, she doesn't know that not ALL CPAs can perform the same services. Those who provide attest services are required EACH YEAR to clock 1000 hours of audit experience plus be subject to a peer review process. EAs don't have that requirement. And if you don't meet those requirements, you're restricted to what services you can ethically provide.

So I suggest to you SaraEA that you be very cautious of what you claim CPAs get away with before commenting.

Maybe Eric should now restrict discussions on professional ethics subjects because each class of professionals are subject to different rules, and that creates political discussions.

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I would MUCH rather see vigorous prosecution of tax fraud than more "regulations" for those of us who are *trying* to do our best.  We've all seen it here - comments in various posts about the guy down the street or the other preparer in little town X who makes up EIC-increasing data - usually with a comment "but we know nothing's going to happen." WHY THE BLEEP NOT?!?!  THAT is where the problem is!  Get those creeps out of our industry, and thereby lessen the fraud plus help taxpayers from getting cheated by shysters.  

IMHO they are ham-handedly pursuing the *wrong* aspect of the problem.  And I'll put my toe on the "politics" line by saying that's typical of government (any government).  Bureaucratic solution = ham-handed, anywhere, anywhen, anyone, anyhow.

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12 minutes ago, Catherine said:

I would MUCH rather see vigorous prosecution of tax fraud than more "regulations" for those of us who are *trying* to do our best.  We've all seen it here - comments in various posts about the guy down the street or the other preparer in little town X who makes up EIC-increasing data - usually with a comment "but we know nothing's going to happen." WHY THE BLEEP NOT?!?!  THAT is where the problem is!  Get those creeps out of our industry, and thereby lessen the fraud plus help taxpayers from getting cheated by shysters.  

IMHO they are ham-handedly pursuing the *wrong* aspect of the problem.  And I'll put my toe on the "politics" line by saying that's typical of government (any government).  Bureaucratic solution = ham-handed, anywhere, anywhen, anyone, anyhow.

Hear, Hear!  I have long maintained that ethics education is not the problem - 90% or more of the time, people KNOW the right thing to do they simply CHOSE not to do it for whatever reason!.  If more fraudulent tax preparers were prosecuted, and the information made public as a deterrent, I think that would do much more good than additional regulation.  And I am not talking about preparers who make an occasional error; that can happen to anyone.  But I don't understand why electronic filers cannot be traced to weed out those who prepare returns and don't sign them or who routinely have changes made on audit for unsubstantiated information.

Education and certification are great things, and I don't see how people can hold themselves out as professionals without getting continuing education in a field that is as complex and ever changing as tax preparation, but there is no substitute for integrity.

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The AZ Society of CPAs board of directors is made up of mostly older power players.  They dictate to the AZ State Board of Accountancy matters such as ethics and peer review requirements.  

When AZ required 4 hours of ethics, the ONLY approved course was owned by one of the board members.  

Pretty sure AZ peer reviewers are all members of the Society.  

The testing and oversight isn't to weed out or catch the bad guys, obviously.  Based on results, that isn't happening.  What is happening is a movement of money.  Follow it and the reason for compliance testing and regulations become clear.  

 

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Sorry CPAs!  I didn't mean you have it easy when it comes to CEs.  I cannot imagine having to sit through 8 hours of compilation and review once never mind every year. I was just having fun with differing ethics requirements.  Maybe the IRS thinks EAs are more sleazy than CPAs so they make us take ethics every single year.  It's boring to both professionals, it's just that EAs have to get bored by it longer than CPAs do.  On the other hand, EAs never have to suffer through the boredom of audit and attest.

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