The IRS heard a consistent chorus at an October 7 hearing on proposed fees (REG-116284-11) for fingerprinting of registered tax return preparers and nonsigning staff at CPA firms: The IRS’ proposal is duplicative, expensive, and can be done in a better way. The fees, estimated to cost $60 to $90 per applicant, would affect about 450,000 individuals, according to the proposed regulations’ preamble.
“We have serious concerns regarding the level of burden that the user fee regulations will place on CPA firms, particularly small and medium-size CPA firms,” AICPA Tax Executive Committee Chair Patricia Thompson, CPA, told the IRS panel. According to IRS estimates, 70% to 80% of those affected by the fees are operating as or employed by small entities. Thompson’s testimony focused on the fingerprinting requirement for nonsigning staff working under the supervision of a CPA, and she said the IRS should consider an alternative that would allow CPA firms to use a consumer reporting agency instead. Under that scenario, the costs per applicant would be significantly below what the IRS is likely to charge, and less burdensome to implement ,Thompson said.
She also strongly reiterated the AICPA’s position that CPAs should remain exempt from fingerprinting because they are already regulated by state boards of accountancy and subject to state ethical and competency rules, a point she also made in the AICPA’s October 7 comment letter to the IRS.
Other witnesses reinforced elements of the AICPA’s testimony. Keith Huebel, CPA, speaking for the National Society of Tax Professionals (NSTP) (as a board member), also asked for flexibility and questioned the fairness of preparers’ paying for background checks of the vendors, calling it a “significant financial burden.” The NSTP supported the AICPA’s contention that CPAs are already subject to background checks and should not be required to be fingerprinted.
A representative of the National Association of Professional Background Screeners (NAPBS), which represents more than 700 consumer reporting agencies, told the panel that employing a system that only uses FBI databases for information has its limitations, and he urged the IRS to allow companies to choose their own vendors to conduct the required checks. Christine Cunneen, CPA, a member of the NAPBS, stressed that FBI and state records are not always up to date and that requiring preparers to go to where a fingerprint machine is located in order to meet the suitability check requirement could pose problems in rural areas. “We work with a name and a date of birth,” she said. “We don’t need a fingerprint.”
Kathy Pickering, vice president–Government Relations for H&R Block, echoed the concern over cost and potential difficulty for rural preparers to access a convenient fingerprinting location. Pickering noted that the total cost per preparer for a franchisee in New York would be $429 including the exam and the IRS and state registration fee. Pickering mentioned the Financial Industry Regulatory Authority (FINRA) as a potential model; FINRA allows its member organizations to fingerprint their own employees, thus avoiding duplicative costs.
A potential sign of IRS flexibility emerged when IRS Special Counsel Richard Goldstein told Pickering that an alternative proposal is “something we could look at.” He and other members of the IRS panel questioned witnesses whether firms should be liable or pay a penalty if a firm-sponsored background check proved to be insufficient to catch a problem. Pickering and others largely deflected the question, but indicated they would provide more information by the Oct. 26 comment deadline.
In addition to fingerprinting, the IRS also proposed to quit issuing provisional PTINs after April 18, 2012. Thompson communicated the AICPA’s concern that, if the IRS stops issuing provisional PTINs, CPA-supervised employees, especially new or temporary hires, will effectively be “benched,” unable to do their job while their PTINs are being processed. “CPA firms need a solution that flexibly addresses their immediate staffing needs without disruption,” she said. The IRS should, at a minimum, allow provisional PTINs to be effective through October 16, 2012, she suggested.