RTRP: A Necessary Certification

All across the country countless professions such as hair stylists, plumbers, locksmiths, and even bartenders are required to undergo some form of state-mandated testing, continuing professional education, and/or licensing procedures to offer services to the general public. Looking to improve the accuracy and accountability within the tax preparation industry, the IRS required tax preparers to pass a minimum competency test covering tax law issues, return preparation, and ethics, and complete 15 hours of continuing education credits per year, and pay a fee to the U.S. Treasury Department to obtain the Registered Tax Return Preparer Designation. Many opposed the IRS new regulation. The Institute for Justice, the firm that brought about strong opposition to the new requirements, believes the new IRS rules would disproportionately and unfairly target small, independent tax preparers who lack the resources needed to meet such stringent regulations. A small mom and pop tax preparation firm would now be required to undergo finger print analysis for a criminal and financial background check at a cost of $30 - $100 depending on the state. The small firm would also be required to pay $116 for the cost of the new RTRP exam, in addition to the costs of any training needed to successfully pass the exam. These same small firms would also be required to pay the yearly costs of $64 to maintain the annual Preparer Tax Identification Number (PTIN). However, with the exception to the annual PTIN renewal, these same regulations expressly exempt Certified Public Accountants (CPAs), Attorneys, IRS Designated Enrolled Agents, CPA Firms, and any tax preparer directly supervised by a licensed CPA. Major tax
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preparation firms like H&R Block, Liberty Tax, and Jackson Hewitt, who all support the new legislation, would not be affected in any way by the suggested regulations changes. While there are many arguments both for and against the new legislation, there is much to be gained for the independent tax preparation firm and the industry as a whole. First, the new IRS requirements bring more respect to the tax preparation profession. Second, mandatory testing of preparers helps to protect consumers from fraud and incompetence related to inexperienced and unethical tax professionals. And lastly, increased preparer education and accountability leads to more accurate tax reporting and less abuse of the tax system. With Attorneys and CPAs already widely recognized as a respected profession, the average tax preparer does not garner similar recognition within the tax and accounting industries. The Registered Tax Return Preparer certification would give credence to the everyday tax professional given the requirement to pass a competency exam and obtain annual continuing education credits. If cosmetologists or commercial truck drivers are required to obtain a certain level of training, testing, and licensure, why shouldnt a professional who is handling sensitive financial information such as social security numbers and wage & income statements be held to a similar standard? A required competency testing and designation would benefit those tax professionals who are serious about the trade. A certification obtained through learned and improved knowledge allows a RTRP to stand above those who do not find it necessary to hone their tax knowledge and expertise.
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Mandatory testing of preparers also helps to protect consumers from fraud and incompetence related to inexperienced and unethical tax professionals. Without preparer regulation, consumers are the most at risk. An unethical tax preparer could fraudulently file tax forms leaving the tax payer with the burden of rectifying the problem. With over the counter software such as Intuits Turbo Tax, there are many unlicensed, inexperienced tax preparers who can file erroneous tax returns without any personal accountability. With more regulation of the industry, consumers are protected to a degree from both unethical and incompetent tax preparation. If tax preparers were forced to maintain a certain level of education and ethical training, there would be greater accountability as professionals who go through the process of obtaining and maintaining their certifications would not want to do anything that could jeopardize their licensing. If a certified RTRP were required to be accountable to both the IRS and the consumer for a fraudulent or overtly erroneous return, more tax professionals would improve their tax knowledge and reporting accuracy, thus, providing consumers with a more trusted and competent tax preparation service. Increasing tax preparer education and accountability also leads to more accurate tax reporting and less abuse of the tax system. According to a taxpayer interviewed for the website Consumerist.com, an improperly claimed Earned Income Tax Credit resulted in a higher tax refund. This type of fraud and theft harms the tax industry and the countrys revenue system as a whole.

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There have been occurrences of unethical preparers guaranteeing tax payers a minimum tax return amount without even reviewing a single piece of supporting documentation. According to the article, When 47 States Have Stricter Regulations on Barbers than on Tax Preparers, Mistakes Are Going To Be Made, there was a report of a partnership between a tax preparation firm and car dealership where the tax professionals would prepare tax returns for the dealerships customers and apply their refund directly to the purchase of a used car. This type of conflict of interest has high potential for fraud and harms both the consumer and the system. Increasing the tax preparers accountability for willful neglect will directly reduce the amount of abuse within the tax system. Allowing the IRS to implement its suggested tax preparer regulation is necessary to ensure the RTRP can become a highly respected designation. Requiring tax professionals to demonstrate a minimum level of tax competency and ethical responsibility would prove beneficial not just for the tax professional, but the consumer, and the tax industry as a whole. Everyone stands to benefit from a more ethical, competent, and accountable tax preparer.

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Works Cited
Bramwell, Jason. IRS to Refund Tax Preparers for Canceled Certification Tests. 17 May 2013. Website. 30 November 2013. <http://www.accountingweb.com/article/irs-refund-tax-preparers-canceledcertification-tests/221808#disqus_thread>. Buckner, Gail. New Tax Preparer Requirements: More Than Meets the IRS . 19 March 2012. Website. 2 December 2013. <http://www.foxbusiness.com/personal-finance/2012/03/19/new-taxpreparer-requirements-more-than-meets-irs/>. Morran, Chris. When 47 States Have Stricter Regulations On Barbers Than On Tax Preparers, Mistakes Are Going To Be Made. 21 November 2013. Website. 2 December 2013. <http://consumerist.com/2013/11/21/when-47-states-have-stricter-regulations-on-barbersthan-on-tax-preparers-mistakes-are-going-to-be-made/>. Saunders, Laura. Tax Preparers Sue IRS Over Licensing. 13 March 2012. Website. 3 December 2013. <http://blogs.wsj.com/totalreturn/2012/03/13/tax-preparers-sue-irs-over-licensing/>. Stultz, Wendy. Tax Preparer Certification. 7 July 2011. Website. 2 December 2013. <http://www.mydolr.com/tax-preparer-certification>. Temple-West, Patrick. IRS rides 1884 'dead horse' law to defense of tax preparer rules. 24 September 2013. Website. 29 November 2013. <http://www.reuters.com/article/2013/09/24/us-usa-taxpreparers-idUSBRE98N17N20130924>.

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