AICPA: IRS Should Revise Proposed Regs Regarding Competency Exam and Fingerprinting for Tax Preparers

Thursday, October 20, 2011 Print Email

In a letter dated October 7, 2011, to Douglas H. Shulman, commissioner of the Internal Revenue Service (IRS), Patricia A. Thompson, CPA, chair of the American Institute of CPAs (AICPA) Tax Executive Committee, urged the IRS to make changes to the user fee regulations it has proposed for tax return preparers as part of its preparer oversight program.

Thompson began by saying, "The AICPA strongly supports the Service's efforts to increase tax compliance and elevate ethical conduct through the adoption of a registration process applicable to the paid tax return preparer community. However, we have serious concerns regarding the level of burden that the user fee regulations will place on CPA firms, primarily small and medium-size CPA firms."

The user fee regulations in question relate to (1) individuals who are required to take the IRS competency exam in order to become Registered Tax Return Preparers; and (2) the fingerprinting of individuals who participate in the Preparer Tax Identification Number (PTIN), acceptance agent, and authorized e-file provider programs.

Thompson identified three primary areas of concern:

1. The fingerprinting of supervised non-signing, non-licensed staff at CPA firms and other firms of licensed professionals who are exempt from the testing and continuing education aspects of the IRS return preparer regulatory regime.

2. The possibility that the IRS might stop issuing provisional PTINs as soon as April 19, 2012.

3. The IRS' request for comments on whether CPAs should be fingerprinted as part of the suitability check performed attendant to receiving a PTIN.

Further discussion of the above issues raised by Thompson:

1. Regarding the fingerprinting of supervised non-signing preparers, Thompson said, "Many private sector employers, including CPA firms, already conduct background checks attendant to the employment relationship, including checking the applicant against existing databases of federal or state criminal activities. This process is often performed by a private consumer reporting agency and is done without the need for the individual to physically visit a particular location for fingerprinting."

Thompson proposed that the IRS consider an alternative framework "that would allow CPA firms to engage a Consumer Reporting Agency (CRA) that is regulated by the Federal Trade Commission under 15 U.S.C. 1681 et seq., to perform background checks to learn of any felony histories of their supervised employees. We believe such an alternative could be crafted to meaningfully meet the IRS suitability check requirement through means other than fingerprinting, and in a less costly and less burdensome way to all parties impacted."

Thompson elaborated on the costs involved, including "the associated IRS user fee and separate vendor fee," which the AICPA believes will "negatively impact the profession." In addition to the current annual $64.25 cost of the PTIN, the IRS user fee for fingerprinting could be $33.00, plus an additional amount to be charged by "IRS Vendors" who would electronically collect applicants' fingerprints and then work with the Federal Bureau of Investigation (FBI) in conducting background checks. Thompson said that while the fees have not yet been announced, "we understand that the total fee, including the portion that is the IRS user fee, is estimated to be approximately $60-$90 per applicant."

2. Of the IRS' proposal to cease issuing provisional PTINs, Thompson said it would create a hardship because it is not flexible enough to accommodate business needs. "The discontinuance of provisional PTINs will result in the need to have supervised employees 'on the bench' and unable to prepare returns under CPA supervision for the period of time associated with the processing of the PTIN application and meeting related requirements. The notion that new hires, new temporary staff, interns, etc., are not supposed to be performing certain services during the pendency of the PTIN application process will negatively impact a CPA firm's ability to do business."

She went on to say, "CPA firms need a solution that flexibly addresses their immediate staffing needs without disruption. Furthermore, the IRS should, at a minimum, allow provisional PTINs to be effective through October 16, 2012, in order to accommodate the completion of tax returns that have been extended."

3. Thompson addressed the IRS' request for comments on whether CPAs should be exempt from fingerprinting by saying, "The AICPA strongly believes that CPAs should continue to be exempt from the fingerprinting process because it is redundant to the suitability process performed by the fifty-five state boards of accountancy that regulate CPAs in the United States and territories."

She added, "Given the longstanding regulatory process provided by the state boards of accountancy, we do not believe it appropriate for the IRS to duplicate the cost or burden of fingerprinting CPAs."

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