Whilenot yet endowed with the RTRP initials, I planned to represent the previouslyunenrolled preparer.
Asof this writing only the Enrolled Agent – Trish McIntire of the McIntire Tax Centerin Arkansas City, Kansas – has responded to my interview questionnaire. Trish writes the blog OUR TAXING TIMES. She often writes very specifically aboutthe tax preparation business. Sheusually has something good and interesting to say, and I often find myselfsaying “Right on, sister!”. A fellow lover of the American Musical Theatre,Trish is very involved in her local theatre group.
There is constant confusion amongthe taxpayer public as to just what is an Enrolled Agent is. An Enrolled Agent is not an agent, employee or representative of the Internal RevenueService. An EA is an independent, private tax professional who is “enrolled” toact as a taxpayer’s “agent” in proceedings with the IRS. An Enrolled Agent is “enrolled” to “practicebefore the IRS” by virtue of taking the Special Enrollment Examination andmaintaining a required amount of CPE credits in the specific area of taxation(and, of course, 2 hours per year in ethics). Both the competency exam and the continuing education requirements forEAs are more extensive than those for RTRPs.
(Q) Explain the difference between an RTRP, an EA, a CPA, and a taxattorney – and in what instances a taxpayer would need each with regards to a1040.
(A) RTRP, EA. CPA and Attorneys aregroups that can, with a valid PTIN, prepare tax returns for compensation. Thereisn’t a special IRS designation for “Tax Attorney.” The IRS gives the samerights of representation to all attorneys in good standing with their stateboards. So my brother with his brand new law degree has the same privilegesbefore the IRS as an experienced tax attorney. But I wouldn’t let him handle atax case for me. Holders of the RTRP and EA designations are tested by the IRSwhile CPAs and attorneys are tested on the state level by their state licensingboard. All have continuing education requirements which are set by the samegroup that tests them. All groups have the right to represent clients beforethe IRS but what the RTRP can do is limited by the IRS.
There is no real hierarchy in thedesignations for a taxpayer when it comes to tax preparation. The ability andinterest to do a type of return depends on the preparer and theirpractice. A RTRP might be a wiz at farms(not on the RTRP test) while a CPA doesn’t handle returns with EIC. Inrepresentation, the RTRP is restricted so any of the remaining tax pros mightbe a better choice. Again, other factors need to be considered in choosing arepresentative.
(Q) Currently CPAs, and attorneys are exempt from proving competence andcurrency in 1040 preparation under the IRS tax preparer regulation regime. Regardless of your opinion on whether or notthe regulation regime is a good idea – explain either why the exemption forCPAs and attorneys is appropriate (and how passing the CPA or bar examqualifies one for preparing 1040s) or why CPAs and EAs should not beexempt.
(A) The test for a RTRP designationis a minimum tax competency test. The same material is tested in the EA exam.The question is do any of the state tests for a CPA or attorney license coverall that material in the same depth? From what I’ve heard, it doesn’t. Theother issue is that tax related continuing education is not required forattorneys and CPA. They can take tax courses but they are not required to takethem. We end up with 2 standards and thegroups that the public would assume to be better able to handle tax issues arethe groups who have less testing and no continuing tax education requirements.
(Q) The talk of tax reform (even though only talk at this point) has turnedto eliminating “tax expenditures”. Whatcurrent tax deductions and credits would you keep in a new simpler Tax Code,and what deductions and credits simply have to go?
(A) I would get rid of all thosedeductions for personal expenses that most people can’t use or make them directdeductions. Employee business expenses, personal casualty and theft losses andmortgage interest come to mind. Get rid of Schedule R. Put in inflationadjustments in taxable Social Security. Something needs to be done withcharitable deductions but I don’t know what.
(Q) Is the Tax Code the proper place for providing “social benefits”, suchas tuition subsidy (the education tax benefits), supplemental welfare (theEarned Income Credit and refundable Child Tax Credit), and to encourage energyefficient purchases (the Energy Credit)?
(A) My concern with a blanketremoval of “social benefits” is the Earned Income Credit. If Congress wants topass an incentive for energy, the Dept of Energy should administer it. HUDshould take care of housing incentives, you get my point. I understand the idea for doing it on taxes –it’s quicker, but that’s why we’ve had so much fraud lately. If Congressinsists on using the IRS for processing, keep it separate from the 1040. Kansashas a property tax rebate that is handled by the KDOR but it has its own returnand processing timetable. That way the claim can be double checked and not holdup the KS-40 refund.
That might be the answer for theEarned Income Credit. I have a real problem getting rid of this program. Thereis a lot of fraud but there are a lot of hard working people who need thatmoney. It’s their cushion against medical bills and emergencies (car repairs tokeep working). Yes there are a few who don’t take better work to keep theirrefund maxed out. But so many more would be happy to lose the EIC if theirincome would go up. Administering it through a Federal department might be anoption as long as it stays reasonably accessible to everyone who qualifies.
(Q) Do you think you will see a true simple Tax Code in your lifetime, withtruly minimal deductions, no credits, and either a flat tax or only 2 taxbrackets?
(A) No! We don’t have the people whocan do that. Have you read the book “Showdown at Gucci Gulch”? It’s behind thescenes of the 1986 tax reform. We don’t have the people who are passionateabout the changes or the leadership who are willing to make it work. On top ofthat, lobbyists are much more influential today than in 1986 and would makecutting their credit or deduction impossible.
(Q) I have suggested doing away with the tax deduction for depreciation ofreal property (see my post http://wanderingtaxpro.blogspot.com/2007/11/here-is-something-to-think-about.html).What do you think of this idea?
(A) I would have a hard timeexplaining to a client that they can’t take any part of the new business buildingoff their taxes. They can depreciate thenew tools but not the building. Also, the depreciation might be more necessaryto the business early in the life of the building than the tax on recaptureddepreciation later. And don’t forget, there is a good chance that there won’tbe any recapture later because of death and the stepped up basis. I don’t seethis one happening at all.
(Q) Now that the tax season is finally over, how will you be spending yoursummer vacation?
(A) Still doing returns - an appointmentcoming in this afternoon. I’m also getting ready to direct a show andco-writing a director’s handbook for the theatre. I’m updating the theatre’swebsite for the new season and redoing my office site. And catching up onpaperwork and filing.
Thanks, Trish!
TTFN
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