Wednesday, January 19, 2011

Tax Blogs Getting Heated!

The "Wandering Tax Pro," Robert Flach, recently posted on his blog:
1) Don't assume that because a person has the initials "CPA" after his name he is an expert when it comes to federal and state income taxes!
The CPA designation means that a person passed a very difficult test at the beginning of his career, possibly many, many years ago. Only a very small part of this test dealt with federal income tax, and usually with “entity” tax issues (corporate, partnership, estates and trusts) and not 1040 issues. It is certainly no guarantee that he/she is competent or current on federal and state individual income tax law, or that he/she has actually prepared a Form 1040 for a client since passing the test.
Apparently, and for good reason, Flach's post struck a nerve with some tax professionals. Joe Kristan, CPA quickly shot back
Don't assume that because a person has the initials "CPA" after his name he is an expert when it comes to federal and state income taxes!
He then spends his next 10 paragraphs elaborating on our shortcomings. And that's fine, to a point. Not all CPAs are qualified tax preparers. By the same token, not every lawyer is capable of defending you on a murder charge. But the guy you want by your side when the state wants to send you to the chair is definitely going to be a lawyer. And while not all CPAs should be your tax advisor, many of the best tax advisors are CPAs.

Soon after, Peter Pappas, JD/CPA, added in agreement:

The obvious problem with Flach’s adverse obsession with CPAs is that he continues to compare non-tax-preparing CPAs with tax-preparing unenrolled agents. 
The truth, of course, is that few people are ever going to hire a CPA who has no experience preparing tax returns because the non-tax CPA doesn’t solicit tax preparation work. It’s not what he does. He’s an auditor, a forensic accountant, an actuary, but not a tax preparer.
It’s a false choice.
But Flach must make the false comparison because he knows that anyone in his right mind would choose an experienced tax preparer with the letters CPA after his name over a purportedly experienced tax preparer with no letters after his name.¹
The reasons to choose a CPA tax preparer over an unenrolled tax preparer are manifest and manifold.
Here’s five of my favorites:
  1. The CPA has at least a bachelor’s degree in accounting;
  2. The CPA has studied for and passed a rigorous examination testing his knowledge of basic and advanced accounting and tax concepts;
  3. The CPA bi-annually completes many hours of continuing education, which, if nothing else, demonstrates his commitment to the profession;
  4. The CPA is likely to carry malpractice insurance;
  5. The CPA is accountable to and may be sanctioned by the state department of professional regulation.
This, my friends, is a no-brainer.

My two cents, I can't help but to side with Peter and Joe on this one (for the record, I am not a CPA). Obviously, not all CPAs focus their practice on taxation.  However, of those CPAs I know specializing in tax, a majority of them are excellent tax professionals.  On the other hand, in my experience, finding the same quality of tax professional that is a non-CPA has been more difficult. That is not to say they do not exist.  Certainly, there are many great non-CPA tax professionals. I have simply found them harder to find.

4 comments:

  1. If I may add some here late I know but all the same I made it.

    I didn't get in on the above mention conversations, but feel the need to chime in now.

    Peter states "The CPA has studied for and passed a rigorous examination testing his knowledge of basic and advanced accounting and tax concepts." I have to say no to this. This is wrong. The CPA exam covers Basic tax concepts only. I am sure I'd rather have someone out there with more than basic tax concepts doing my return.

    Peter states that the CPA completes many hours of continuing education. The cpa only choses to study tax, its a choice so you may find a CPA that studied tax but the chances are as slim as is just as difficult as finding a Tax pro.

    Mal-practice insurance? Are you kidding me Peter? You have made this point before, and I have to say to point out the need for it is a bit scary. Like a Doc. they carry the same insurance, is it for the same reason? Mal-practice is malpractice. Do I have it yes.

    "The CPA is accountable to and may be sanctioned by the state department of professional regulation." So is the Non-CPA Tax preparer. Circular 230 covers this.

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  2. I also believe that choosing a CPA over an unenrolled tax preparer is the way to go because as mentioned in the post cpa continuing education courses which CPAs are mandated to complete to maintain their CPA license keeps them updated with the laws and regulations in the industry and I am sure everyone would want the person filing their taxes to be knowledgeable in all these areas.

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  3. In a 2008 study by the Treasury Inspector General for Tax Administration, unenrolled, unlicensed preparers had only a 35% accuracy rate in preparing income tax returns. The average underpayment for the incorrect returns was $755. More alarming, the TIGTA determined that more than one-third of the erroneous returns contained misstatements or omissions that TIGTA considered willful or reckless.

    Source: http://www.journalofaccountancy.com/Issues/2008/Dec/UnenrolledPreparersOftenWrong.htm

    Full Study: http://www.treasury.gov/tigta/auditreports/2008reports/200840171fr.pdf

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  4. Informative post.

    I agree that not all passers are experts. It can be that some project managers haven't updated their knowledge by attending current seminars and workshops to improve themselves.

    I really learned a lot from your post. Thanks for sharing!

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