Please Explain To Me...

what unique internal procedures does a CPA firm that other tax firms don't have? I really want to know.

I'm sure most tax people know by now that last week the AICPA conned a bunch of Congress people to send a letter to Secretary Geithner about the upcoming tax preparer licensing. AICPA Congress has two points of concern. The second is that the IRS might not have financial resources to properly handle the registration and testing of the preparers. With the deficit, isn't there a better way for the IRS to spend money? Hello.. the preparers are paying for the registration and testing. The IRS might spend some out of their own pocket but they aren't footing the whole bill.

But the first concern makes me wonder what CPA firms are doing so different that they think they should be exempt from the new rules. The IRS rules require that anyone who prepares tax returns must register with the IRS by the first of the year in order to prepare 2010 year returns. They'll then have to take a test to ensure they have the basic tax knowledge to prepare returns and maintain that with continuing education. (Once the program is all in place the testing will come before the preparer can be licensed.) The IRS has been very specific- everyone who makes a decision on how to handle the taxpayer's information is required to be registered and tested. The only exception is a data entry person who only enters info from organizers or informational documents. Even if they don't sign the return, anyone else has to be licensed.

AICPA is contending that since a CPA checks and signs the returns, and they are already registered with their state and exempt from the Federal rules, that the real preparers in a CPA firm should not have to be licensed. Excuse me- I have checked returns for accuracy and I can say that it is easy for a mistake to pass through checking. The problem is based in the notes the preparer takes during the interview and while preparing the return. How complete are the notes? Do they list every question the preparer asked and what the taxpayer answered? Do they include the questions the taxpayer asked and how the preparer responded? Is the CPA going to personally double check every entry and every possibility? I doubt it. The preparers were hired to do the heavy lifting and second guessing every decision is not productive. That is why the IRS has decided that, even if they don't sign the return, anyone who makes a tax decision on the return has to be licensed.

CPA firms are no different from non-CPA firms. If I hire someone to do the basic work on my client's returns, I will have to make sure they are licensed even if I sign the return. The same for any accounting firm. You'll have to convince me that all CPA firms have strict documentation rules that they follow all the time and all CPAs really check all returns they sign for other preparers before I will consider giving them a pass. Otherwise, they should follow the same rules as the rest of us.

Comments

[Joseph Reisman]

The AICPA believes that every one of its members is of high caliber, above board, and above reproach. Especially those holier-than-thous of the Enron fame. But that aside, many licensed by the various States have little experience in tax preparation. Everyone who prepares a tax return should have basic information and should not be afraid to take an exam to prove to the public, if not to themselves, that they are at least average.