UPDATE 1/10/14: Robert Flach has responded to this post with his own post, which you can find here.
In response to his question to me at the end of his post:
(D)oes this post change your opinion in any way? And what about my idea for a 2-tiered program?
I am opposed to the 2-tiered program. Any government-sponsored RTRP program — even a voluntary one — would harm EAs.
But I have no opposition to a third party taking over a voluntary RTRP designation. In his post, Robert addresses what would need to be done to make sure a voluntary RTRP overseen by a third party would actually have name recognition (as opposed to the ATA and ATP designations that already exist and that no one has heard of). I agree with him on how to achieve recognition.
But I think it would be a tough sell. How much demand is there, really, for the RTRP designation? Very few unenrolled preparers bothered to become RTRPs when it was required by the IRS. How many would become RTRPs if it was voluntary and overseen by a third party? Probably about as many as those who become ATAs and ATPs.
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(Original post from 1/8/14)
Robert Flach at The Wandering Tax Pro Blog asked for my opinion regarding the latest idea being floated about a voluntary Registered Tax Return Preparer designation.
The mandatory RTRP as envisioned by the IRS is headed to almost-certain defeat in the courts. But Robert is proposing that the RTRP be kept, but made voluntary instead of mandatory, with the IRS providing oversight (or alternatively, having a private organization oversee it).
And earlier this week, the new IRS commissioner said he favors the RTRP being made voluntary if the mandatory option is struck down in the courts.
The idea of a voluntary RTRP is bad because:
- What purpose would it serve? It would be a useless designation no matter who oversees it.
- If administered by the IRS, it would harm Enrolled Agents.
Wants Vs. Needs
Robert asked my opinion on Twitter a few weeks ago, and I responded saying that there’s no need for an additional designation. Just encourage the unenrolled to become EAs.
That led to the following exchange:
@dinesentax There is need to recognize/identify competent, experienced, ethical, & current "unenrolled" taxpros who don't want to represent.
— rdftaxpro (@rdftaxpro) December 5, 2013
Robert is confusing “wants” with “needs.”
I can understand that some unenrolled might want letters after their name. But that’s a “want,” not a “need.”
What would a voluntary RTRP designation “do”? Creating a designation for the sake of having a designation is a bad idea — especially if it means giving the reins to the IRS to oversee!
And as I’ve said before, an RTRP overseen by the IRS would almost certainly push EAs even further to the fringes of the tax world.
Private Overseer?
What about having a voluntary RTRP designation under a private overseer, rather than the IRS?
We already have voluntary tax designations offered by the National Society of Accountants (the “other NSA”). NSA offers designations called Accredited Tax Advisor and Accredited Tax Preparer.
NSA is a great organization, and I’m sure the folks who have attained the ATA and ATP designations are proud of their accomplishment.
But both designations suffer because: 1) no one has heard of them and 2) they have no legal backing.
No one’s heard of the EA designation either, but at least being an EA gives me the legal force to do things on behalf of my clients.
A voluntary RTRP overseen by a third party would fall into the scrap heap with the ATA and ATP designations because it would have no legal backing.
Bottom Line
If you can prepare tax returns without being an RTRP, and if the RTRP designation doesn’t allow a person to represent clients, what exactly would people who achieve a voluntary RTRP designation do with it????? What’s the point?????
I think my initial “tweet” in response to Robert covers my opinion on this matter best:
.@rdftaxpro I believe in leaving things as they are and encourage the unenrolled to become EAs, rather than creating a new designation.
— Jason Dinesen (@dinesentax) December 5, 2013
I agree with you. But moreover, I’d say that no test could ever be designed to “recognize/identify competent, experienced, ethical, & current ‘unenrolled’ taxpros who don’t want to represent.”
There are incompetent EAs. There are inexperienced EAs (I once was one, having never prepared a tax return for someone else prior to passing the EA exam). There are unethical EAs (I’ve fixed problems caused by them). There are non-current EAs. (It’s quite easy to collect CPE without actually learning much. Or for those in the unethical category, without actually learning anything at all.) Replace the EA test with an easier one called an RTRP test, and that’s still going to be true.
The primary way to be recognized as a “competent, experienced, ethical, & current” tax pro is through referrals. That’s going to be true regardless of what regulations are imposed or voluntary tests are required.
That said, if the RTRP exam is voluntary, then there’s no need to make it easy. What if the RTRP exam consisted of parts 1 and 2 of the special enrollment exam? RTRPs would have all the same CPE requirements as EAs. All current EAs would automatically be RTRPs as well.
Would this “push EAs even further to the fringes of the tax world”? I’d say yes and no. EA would be what you would look for if you wanted a tax representative, for an audit, an IRS letter, an OIC, etc. RTRP would be what you’d look for if you wanted a tax pro to prepare your taxes. There would probably be more RTRPs than there currently are EAs, but the standard would be the same (other than representation issues). As a bonus those EAs who want to focus on tax preparation could emphasize the RTRP part, and those EAs who want to focus on representation could emphasize the EA part.
One problem is that there are already a bunch of people who passed the (old) RTRP exam. At the very least they should be able to take the new RTRP exam for free.
What do you think about this?
Anthony,
Thanks for your comments. My fear with the RTRP has always been that the IRS would promote it more than the EA designation (which wouldn’t be hard, considering that they don’t say much about the EA designation at all), thus pushing us further to the fringes.
I suppose I might be able to get behind the idea of all EAs being able to use the RTRP designation.
The key question, I think, is: if the IRS is overseeing the RTRP designation and it has no legal force (in other words an RTRP designation not required to prepare tax returns and offers no other legal rights or privileges), is it something the IRS should even be overseeing?
The EA is voluntary and you don’t have to have it in order to prepare tax returns (so are CPA and attorney designations, for that matter, at least when it comes to preparing tax returns) but the EA designation has legal force to “do” other things (representation). Thus it makes sense for a government-sanctioned organization to oversee it. (Same concept with CPAs and attorneys, regulated at the state level through boards of accountancy and bar associations that ultimately oversee based on laws passed by the state.)
As far as RTRP being promoted more than EA, I do think that would happen. RTRP is a better name, and RTRP is more geared toward what most EAs want to use EA for – a designation saying that they know how to prepare taxes. If the RTRP test remains as easy as it currently is, that would definitely be a bad thing. If, on the other hand, the RTRP test is as difficult to pass as the EA test, and all EAs are automatically RTRPs, then it might just be a way for EAs who want to focus on tax prep to get a better name.
On the other hand, I do see the point that it’s an unnecessary designation and therefore maybe the IRS shouldn’t be getting involved. On the other other hand, if they just use parts 1 and 2 of the SEE (maybe with a little bit of re-arranging)…
I don’t know. It’d be much better than keeping the RTRP test as a completely separate test, though. I think I’m in full agreement with you that this would be bad for EAs.
[…] VOLUNTARY RTRP DESIGNATION! I don’t care for the idea, for the reasons Jason Dinesen explains, but would be fine with preparers banding together to develop their own privately-administered […]
About 30 years ago, many incompetent individuals called themselves “financial planners.” The public did not commonly understand the distinctive training and ability possessed by a SEC registered investment adviser (RIA). Instead of a government solution to the situation, voluntary private competency criteria – including an examination – were established for a personal finance professional to attain status as a “Certified Financial Planner.” That’s now a respected designation, although some people holding it are still raw and provide poor services – similarly to a few Enrolled Agents not delivering high quality tax work. Third party CFP licensing has actually helped increase recognition of the RIA title. This did take a couple of decades. Maybe the NSA just needs a little more time for Accredited Tax Preparer to receive public recognition – perhaps with some help from the IRS. That could enhance the image of an EA license too.
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