I Ask Again: What’s the Upside of Preparer Regulation for Enrolled Agents?

The latest issue of the “EA Journal” from the National Association of Enrolled Agents arrived in my mailbox earlier this month. I read with great interest what the NAEA talking points were regarding tax preparer regulation at a legislative day NAEA held in Washington, D.C. in May.

As always, NAEA is in favor of preparer regulation. But as always, NAEA provided no reason for me as an Enrolled Agent to support regulation.

I’m not opposed to regulation in and of itself. I’m opposed to regulation that obviously harms Enrolled Agents by doing nothing for EAs while giving a formal, government-blessed designation to a group that outnumbers EAs 7-1.

EA is a superior designation to the proposed RTRP designation. EAs have unlimited practice rights in the tax world, same as attorneys and CPAs. But nearly 90% of the population in this country has never heard of an enrolled agent.

How will the RTRP program help overcome the lack of recognition and lack of respect that EAs struggle with? These are things that NAEA can’t seem to answer. 

Here’s what NAEA’s talking points with lawmakers were (all quotes are taken directly from the July “EA Journal”):

Let’s Face it. In far too many instances, return preparation is a “race to the bottom” where taxpayers judge their preparers by the size of the refund they generate, not by the accuracy of the return. Because of this race for the bottom, amongst other reasons, NAEA has long supported the notion that IRS should have a cop on the beat.

I agree with the “race to the bottom” part. I disagree, though, that the solution is preparer regulation. The solution is to reform the tax system.

It doesn’t make sense to live in a world in which barbers and beauticians are regulated but return preparers are not.

Which begs the question: SHOULD barbers and beauticians be regulated? (Or how about regulation of magician’s rabbits? Yes, really.)

And I’m still not seeing an answer as to how EAs will benefit from preparer regulation.

While IRS’s approach to return preparer regulation is imperfect NAEA largely supports the agency’s efforts. We do not believe a requirement to demonstrate basic competence is onerous. We do not believe a requirement to earn continuing education annually is unreasonable. EAs have passed a much more challenging test. EAs have a much higher CE standard (and many readers exceed this minimum requirement by a significant margin). These requirements do not cause EAs to close their doors.

I agree that the proposed RTRP program is not an onerous or unreasonable burden onto the unlicensed preparer. But that doesn’t mean it’s a good thing. And again, how do EAs benefit?

The testing and CE requirements level the industry playing field, improve the professionalism of the industry, allow IRS to police the preparer-for-hire universe, and create an environment in which returns are likely to be more accurate. The oversight is good for the industry as a whole — good for individual taxpayers and good for tax administration.

Passing an open-book test and snoozing through a 2-day conference are enough to meet the RTRP testing and CPE requirements, so I highly doubt that the accuracy of tax returns will magically increase among the unlicensed.

Also, how exactly does the RTRP program “level the playing field”? If the RTRP program survives the court challenge, it would give a government-blessed designation to a group of tax pros who outnumber EAs 7-1.

There is no doubt that the RTRP designation would get publicity from the IRS and the media. The fact that EA is the superior designation wouldn’t much matter. EAs would get pushed further to the margins. This is called “leveling the playing field”?

As I did in March, I again ask NAEA: why is the largest (and only) advocate for enrolled agents so rah-rah for the RTRP program? What exactly is the upside to preparer regulation for EAs? How will EAs benefit from the RTRP program?