As you build a tax practice, be sure to remind consumers about your tax preparer certification. This is important because rank and file workers at a CPA firm are not required to pass the tax preparer exam. The individuals preparing significant parts of tax returns at a CPA firm are not necessarily tax experts. They are often staff members with primary responsibilities involving bookkeeping or other accounting tasks that are less demanding than tax work.
The public is probably not aware of the functions inside a CPA firm regarding tax return preparation. A typical firm has only one CPA. Some firms have several associates who are CPAs. However, these are not often the individuals making decisions about the correct tax treatment of items on a tax return. That process is frequently conducted by staff accounts. Some of these individuals have significant experience but in many cases they are not thoroughly trained. They are expected to learn on the job. Training is not always easy when at a busy CPA practice with a staff of less than ten people.
Sure, a CPA reviews the work in order to sign the tax return. By then, however, judgments have already been made about many critical matters that extend beyond checking the math. The figures for certain deductions may appear on the correct tax forms, but only the original preparer ascertained the true nature of every number.
There are simply certain steps that require extensive income tax course training. For example, a Registered Tax Return Preparer learns to ask if the vacation home was ever rented or whether the taxpayer failed to volunteer details about any unreimbursed employee expenses.
The IRS has exempted from registration any tax preparers who don’t sign returns and are supervised by a CPA. Non-signing employees of attorneys are also exempt. The same exception applies to individuals supervised by enrolled agents. However, enrolled agents are trained specifically in tax services.
The staffs of small CPA firms do a little of everything in addition to preparing substantially all of various tax returns. They have bookkeeping assignments and projects to prepare tax forms that don’t even require a PTIN. Among the individuals not subject to the PTIN mandate are those who prepare such forms as W-2s and 1099s.
An individual who receives a PTIN under the exception rule is not required to pass the competency exam or complete the same continuing education requirements as a RTRP. However, non-signing preparers qualifying under the exception are subject to the duties and restrictions under IRS Circular 230. So the educational and aptitude requirements for non-signing tax preparers at CPA firms remain only as good as the supervision they receive.
Meanwhile, professionals who register under Circular 230 as Registered Tax Return Preparers can point to certification and CPE that distinguishes them from poorly qualified tax practitioners of the past as well current non-signing staff at CPA firms.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.