By Stacie Clifford Kitts, CPA
The Wandering Tax Pro (aka Robert D Flach) has a great post that you should check out. In After thoughts Part I, Robert sings the praises of the Vita program while addressing a prior post centered on whether tax preparers should be registered and licensed. I actually have some strong feelings about the topic, so I am going to jump right into it.
Here is a little background for those readers who may not be familiar with the debate: The IRS is seeking proposals on how to advance tax preparer performance by implementing consistent standards. You can read more about this over at The Business Perspective.
So on with my argument: I have picked up many returns where I wished that the preparer had been required to take a proficiency test prior to touching the tax forms.
Case in point, how about a partnership return (Form 1065) prepared by an attorney for a single member LLC. The client and the attorney were actually perplexed as to why the IRS was sending out “what the heck are you doing letters.”
Alternatively, how about the Enrolled Agent who filed a first year C Corporation return (Form 1120) for an LLC because she thought LLC meant Limited liability Corporation.
Yes, I have to say, I think it is a good idea to require tax preparers to prove their competency before they are allowed to charge a fee for the preparation of a tax return. Although I believe the proposed regulations are targeted more toward persons who are not CPAs, lawyers, or EA’s, it is obvious from what I have described that a proficiency test is needed for everyone preparing tax returns.
As a CPA, I am familiar with regulation, as I am required to keep my license up to date by taking 80 hours of continuing education every two years. I have no problem with taking a proficiency exam. If I am unable to pass it, well then I should not be preparing tax returns. The tax profession is not stagnate; laws are constantly changing. Just because someone could accurately prepare a return last year, does not mean he or she understands the rules this year.
And, for those prepares out there who are not familiar with the federal filing requirements of an LLC, here are some clues: Unless you elect to be taxed differently under the check the box rules by filing Form 8832 Entity Classification Election, owners of single member LLC’s file a schedule C along with their individual income tax return Form 1040. LLC’s with two or more member file a partnership return Form 1065.