Lawmakers Seek to Exempt Nonsigning Preparers From Oversight
By Diane Freda
Publication Date: 09/03/2010
The Internal Revenue Service and Treasury Department have not yet responded to an Aug. 2 letter from 30 lawmakers asking that regulators exempt nonsigning tax preparers from their plans to oversee all tax preparers, Rep. Brad Sherman (D-Calif.) told BNA Aug. 31.
Sherman and Rep. Mike Conaway (R-Texas), who also are certified public accountants, want IRS to back off of its plan to include nonsigning tax preparers at CPA firms in their proposed rules (REG-138637-07), saying the rules will require hundreds of thousands of employees at the firm to register with IRS needlessly.
IRS has proposed to require any tax preparer who prepares all or substantially all of a tax return—whether that preparer signs a return or not—to obtain a preparer tax identification number (PTIN) and be tested for competency.
Sherman said he is sure Treasury or IRS will respond, but whether their answers will be “substantive” and “well thought out” is another question. Conaway told BNA Sept. 1 that he is less confident regulators will be responsive to these concerns, if history is any indication.
Exemption Now Rather Than Later
Conaway said while Treasury and IRS are well along in their plans to regulate tax preparers, there is still time to change course and exempt CPAs who do not sign a tax return from the proposed new registration requirements.
He also said rather than finalizing proposed PTIN rules and addressing at a later date whether to test nonsigning CPAs, IRS should “try to get it right” the first time, and exempt nonsigning tax preparers from the start.
“Once those folks start signing up and paying the $64.25 [registration fee] we may have passed the Rubicon,” Conaway said, but even then IRS has the authority to unwind its decision.
Overall, he questioned why the service would want to create a database of practitioners who may not be used as tax preparers, going forward.
Signers Responsible
Conaway said it is common practice in large public accounting firms for managers and senior members of the firm to get a return ready for signature, with a manager or partner taking responsibility for signing it. But the person responsible for signing the return would have done very little of the legwork to put it all together, he said. Today, with sophisticated tax software, the signers at the firm may be doing more of the input but not a great deal, he said.
IRS's proposed rule creates no bright line, which leaves practitioners trying to figure out what “all or substantially all of a tax return” is, Conaway said. “All those questions are going to get balled up in there as to what you base it on,” he said. “Do you base it on the number of inputs into the computer to get ‘substantially all,' do you base it on the values of those inputs or deductible items, those kinds of things?”
The outcome will be to cause CPA firms to say everyone who touches a return is someone IRS potentially would want to look at, Conaway said, adding that the only person that IRS should care about is the person who put their name or the firm name on the return. “That's where the buck stops,” he said. IRS is creating a system that is overkill, he said, and its attention would be better focused on preparers with no training or experience who “hang up a shingle” and purport to be knowledgeable about tax laws.
The complete text of this article can be found in the BNA Daily Tax Report, September 3, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2010, The Bureau of National Affairs, Inc.
