Tax Lawyer's Blog

The IRS has published comments from tax preparers about the new tax preparer regulation regime.

One of them caught my eye. It’s from an unenrolled tax preparer named Gregory Jamieson (emphasis added):

I am a tax preparer who is not a CPA, attorney or enrolled agent. I prepare about 40 individual and 20 other entity returns annually. I have a very good understanding of 900 returns and prepare about 10 each year. I prepare my returns accurately and would challenge anyone to find errors. If I do not know the answer I find out or I do not prepare the return. I believe that most preparers do this and there are a few preparers that are causing this “problem.”

I have seen numerous returns prepared by CPAs and other similar preparers that were incorrect. I am concerned that this is driven by the CPAs that want the businessthat people such as me already do. I am extremely competent in the returns I prepare and use the same software that many CPAs use (ProSeries). 

We generally charge less and I can see how CPAs would want to drive us out of business. In the end the consumer would lose because they would pay more for the same service. I would be driven out of business so CPAs could make more money. I am willing to take some courses or some certification, but to become an enrolled agent or CPA would cause an undo burden on my business. There could be a certification or exemption for preparers that do less than 100 returns per year.

The answer should be to weed out the preparers that do not know what they are doing and not penalize business people like me.

Where to start? Well, how about by separately discussing each of Mr. Jamieson’s highlighted assertions?

1.  I prepare my returns accurately and would challenge anyone to find errors

This is a vacuous offer, unless Mr. Jamieson is prepared to violate taxpayer confidentiality and send me all of the tax returns he has prepared for his clients over the years. Then again, Mr. Jamieson is not a regulated tax preparer and, therefore, does not have a duty of confidentiality to his clients. Send the returns to my office, Greg. I promise you I’ll find some mistakes.

All kidding aside, a self-serving declaration by an unenrolled tax preparer that the returns he prepares are 100% accurate is about as valuable as an NBA player announcing that nobody can guard him. Pretty soon Gregory Jamieson is going to be talking about Gregory Jamieson in the third person.

Finally, Mr. Jamieson, just because you say you’ve prepared your clients’ tax returns accurately, doesn’t mean you have. If you made an error in the first instance, it’s unlikely that you are aware that you made it. 

Unless a tax preparer maliciously prepared his clients’ tax returns incorrectly, one would assume that he thinks he prepared them accurately.

Every honest preparer believes he has accurately prepared his clients’ returns. In fact, that’s the very representation he makes when he signs those returns under penalties of perjury.

2.  I have seen numerous returns prepared by CPAs and other similar preparers that were incorrect

This is utterly irrelevant and, if anything, an argument for more regulation, not less. 

If regulated professional preparers like CPAs often make mistakes, it’s logical to assume that unregulated preparers are also making mistakes. And probably in even greater numbers?

Right here on these pages we have heard several highly insecure unenrolled preparers make the specious and unsupported claim that they have personally corrected many CPA and attorney-prepared tax returns. But it’s a meaningless assertion. After all, I have on occasion personally corrected the bad medical advice given to family members by duly licensed doctors. Using the logic of Mr. Jamieson and other logic-challenged unenrolled preparers, that would make me a better “doctor” than duly licensed doctors.

The argument is dumber than texting while driving.

3.  [Tax preparer regulation] is driven by the CPAs that want the business that people such as me already do

Here, Mr. Jamieson, combines (although, I am sure he is unaware of it) the propaganda technique of motive-questioning with that of accusing one’s opponents of being involved in a nefarious conspiracy to rule the world.

All licensing regimes create barriers to entry that benefit those who are able to overcome those barriers and hurt those who are not. But to suggest that the former support the regulation of tax preparers only to fatten their own wallets is fatuous.

The same argument can be applied to every profession:

• Trained and licensed jet pilots want continued regulation of pilots because they want to stop others from competing with them
• Doctors want the practice of medicine to be regulated because they want to keep all of that lucrative brain surgery business for themselves
• Registered nurses want the practice of nursing to be regulated because it limits competition and allows them to demand higher wages

Finally, one could argue that if anyone is motivated by self-interest it is those unenrolled preparers, like Mr. Jamieson, who, for whatever reason, chose not to do the hard work it takes to become CPAs, IRS Enrolled Agents or tax attorneys and who, because they chose not to do that hard work, now demand that those who did choose to do it derive no benefit whatsoever from their efforts.

4.  We generally charge less and I can see how CPAs would want to drive us out of business. In the end the consumer would lose because they would pay more for the same service.

The reason an unenrolled preparer generally charges less¹ than an enrolled preparer is because the consumer takes a risk in having his return prepared by one.

In short, unenrolled preparers like Mr. Jamieson charge less for tax return preparation because they are not regulated and, therefore, have no obligation to incur expenditures that are borne by regulated tax preparers and are designed to benefit the consumer:

• Malpractice premiums
• Continuing education
• Licensing fees and dues

5.   I am willing to take some courses or some certification, but to become an enrolled agent or CPA would cause an undo burden on my business

If Mr. Jamieson lacks the same attention to detail that he lacks in putting forth his argument against tax preparer regulation, a taxpayer would be a fool to hire him.

Nothing in the proposed taxpayer regulation regime would require currently unenrolled preparers like Mr. Jamieson to become a CPA or IRS Enrolled Agent.

A more cynical person might be inclined to see the above statement as evidence of Mr. Jamieson’s motive of self-interest. Becoming an enrolled would force Mr. Jamieson to make expenditures of time and money he does not wish to make, therefore, because he is not prepared to make those sacrifices he believes that people who have made them should get no benefit from it whatsoever.

And if they do get a benefit from it, they are just trying to dominate the market.

Pshawdlerdash!

6. [We should] not penalize business people like me

Amazingly, Mr. Jamieson actually believes that the purpose of the IRS’s planned regulation of tax preparers is to punish him rather than to protect the public. This is mere paranoia.

I am highly regulated. I am required to obtain 80 hours of continuing accounting education every two years and 30 hours of continuing legal education. I am required to carry malpractice insurance and must pay annual dues and licensing fees to both the board of accountancy and the Florida Bar.

I look at none of this as a penalty, but rather, the cost of being granted the privilege of belonging to a profession that has basic licensing requirements and standards of conduct.

Footnotes:

¹  Although I am willing to accept it as a general proposition, I have not seen any proof that unenrolled preparers universally charge less than enrolled preparers. In fact, there have been many cases where an unenrolled preparer has overcharged a client simply because the client was unsophisticated in tax and financial matters and was not in a position to determine the appropriateness of the fee or because the unenrolled preparer lacked an understanding of the tax code.

Also, CPA and attorney tax preparers generally deal with more sophisticated and knowledgeable clientele who are more capable of determining whether a quoted tax preparation fee is or is not reasonable.

In short, it is by no means a certainty that a CPA or tax attorney will charge more for tax preparation services than would an unenrolled preparer. But because price is the only competitive advantage an unenrolled preparer could ever possibly have over a regulated tax preparer, it is often stated as a metaphysical fact.

Related Posts:

• Taxpayers Want Preparers to Meet Ethical and Competency Standards
• Cato Institute: Tax Preparer Licensing a Conspiracy Plot
• Unenrolled Tax Preparers and the Practice of Law
• Tax Preparer Regulation and the Privilege
• Beware the Unlicensed Preparer
• The Questioning of Motives in the Tax Preparer Regulation Debate
• Unenrolled Preparers Strictly Limited, Eleventh Circuit Rules
• Tax Preparers, Assumptions and Discount Parachutes

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