Reasons Taxpayers and Enrolled Agents will Benefit from S. 832
the legislation protects taxpayers and elevates our profession. It compels paid preparers to demonstrate competency and punishes those who are fraudulent. The ability to demonstrate competency through licensure distinguishes the professional from the rank amateur. Taxpayers will be assured that the person sitting across the table from them is competent to file their return. The only practitioners who have something to lose are those either unable to demonstrate competency or unwilling to adhere to the time-honored Circular 230 rules.
the legislation requires IRS to promote all Circular 230 practitioners. IRS will be required--and provided adequate resources--to launch public awareness campaigns that will inform taxpayers that only EAs, CPAs, attorneys and the newly-created class of preparers may be hired to prepare a return. Further, IRS will be required to explain the difference between the two tiers of practitioners and to explain each of the designations. Thus, IRS will explain that EAs, CPAs, and attorneys can do everything with respect to representation and preparation. IRS will further explain whatever functions enrolled preparers may perform with respect to return preparation, including EITC return preparation. For the first time in our history, the general public will learn about EAs. Clearly, this public affairs campaign would be unprecedented and impossible to replicate absent this legislation.
the legislation recognizes and retains the status of the current Circular 230 practitioners (aka federally-authorized tax practitioners). It will neither require them to take the new test nor to change their behavior in any way. EAs, attorneys, and CPAs will continue to have the right to offer a complete suite of services to taxpayers, from representation to preparation. As Office of Professional Responsibility (OPR) Director Cono Namorato said last May, there will be "a new fourth category that can't do the same representation activity that EAs, CPAs, and attorneys can do now."
the legislation requires all paid preparers to demonstrate competency and to become licensed. In order to become licensed, those who are not EAs, attorneys, or CPAs will have to demonstrate competency by passing an IRS-administered test. In order to maintain a license, a preparer will have to demonstrate continued competency through continuing professional education. If a disbarred or unlicensed person signs a return, (s)he will be subject to a fine of up to $500 per incident. No longer will we have to compete with rule-breaking competitors, and no longer will honest, ethical practitioners find themselves at a disadvantage in the marketplace.
the legislation minimizes confusion by providing two tiers of tax practitioners. After enactment, two tiers of tax practitioners will exist, the current Circular 230 practitioners (EAs, attorneys, and CPAs) and the the newly-created class of preparer. Taxpayers paying a third party will be required to use EITHER one of the current federally-authorized tax practitioners OR a person with the new credential. This is a simple, straightforward approach that is easy for taxpayers to understand. All those who are paid preparers or paid to represent taxpayers will be governed by Circular 230. All will be subject to oversight by OPR.
the legislation gives OPR the tools and resources to eliminate the unscrupulous. A single organization within IRS will be charged with assuring competency and ethical behavior in the preparer/representation community. The head of OPR is to report directly to the commissioner of IRS and is given the resources (staff and budget) to protect taxpayers from unscrupulous and unethical members of the tax community. This new structure is counter to the current practice, in which the enrolled, who are held to a higher standard, are governed by one part of IRS and the unenrolled are governed (or ignored, as some would argue) by another part of IRS (SB/SE). Fees and fines will pay for adequate OPR staffing and for the required public relations campaigns.
the legislation protects the EA credential. NAEA has long fought for the provision adding a new section permitting enrolled agents to use the name enrolled agent, EA, or E.A. to the tax code. States will be unable to trump this federal law.