February 3, 2003
1:00pm PT
Teleconference Meeting

Members in attendance

• Gerald Gensiejewski, Jr.
• James Griffin
• James Grimaldi
• Lawrence Lexow
• Robert Meldman
• Diane Mignano
• Francis Paolone
• Sherry Whah
• Lillian Woo
• Anne Gruber, Designated Federal Official

TAP Staff

• Judi Nicholas - TAP Manager - Seattle, WA
• Sallie Chavez - Analyst - Plantation, FL

Committee Vice-Chair Meldman welcomed everyone and explained that Chairman Chris Lowe was at a CPE and could not attend the meeting and Bob would chair the call.

Roll call
Roll was taken. There was a question of what was quorum. It was discussed that it was never decided what quorum would be. A discussion ensued and it was decided (by consensus) that quorum would be ½ plus 1. Quorum was met.

Review of Minutes
The minutes of the January 6, 2003 meeting was reviewed and by consensus was accepted as written.

National Licensing of Practitioners
Sherry Whah discussed the information that she would like to have submitted to USA Today for their poll. Everyone received a copy of the proposal. Vice-Chair Meldman thanked Anne Gruber and Sherry Whah for preparing it. (See Attachment 1: Survey)

A question was asked if any other profession needed a license and a yearly examination. The response was that attorneys, CPA and enrolled agents are required to be licensed and also must have varying degrees of continuing education annually. However, none of these professionals were subject to reoccurring examinations. It was pointed out that recently patent officers (not attorneys) were required to be tested annually.

There was discussion about Nina Olson's report to Congress on the issue. Ms. Olson's recommendations would require refresher examinations for all licensed tax preparers other than attorneys, CPAs and EAs. A lively discussion took place regarding whether everyone, i.e., including attorneys, CPAs and EAs should be required to take this type of reoccurring examination. It was agreed that expanding the annual reexamination to three professionals, i.e., attorneys, CPAs and EAs would not be acceptable.

This program (licensing) will be burdensome for the government. Should it be out-sourced to another organization?

What would be the repercussions if preparers don't comply? Need to have legislation to state specifically that it's against the law not to be licensed and to prepare returns. Will this send some preparers underground?

There will be a need to educate the public and tell them it's against the law to prepare a return without the license.

VITA is concerned but they do pass exams. They would also be exempt because they are not "paid".

What about the Office of Professional Responsibility (a new organization within the IRS)? Will it be in control of this program? Can it handle the program? Maybe it can handle some of the requirements. Others would be handled by other organizations and agencies.

There are statistics that indicate that on EITC returns the error rate is the same for CPAs, EAs and unenrolled agents.

Is this a good idea to eliminate the "retail" preparers? Oregon has a very low error rate. Should the Oregon state model be used as the National model? States are not interested in licensing.

Vice-Chair Meldman stated that he thinks the committee should hold to the two (2) issues:

1. Should there be licensing?
2. Who should do it?

He brought it to the committee and asked each for their opinion.

Gerald Gensiejewski - He is not "sold" on the issues. He thinks the IRS should require ALL preparers to get a PTIN (preparer tax identification number) and put it on all returns. Then the IRS could get some statistics. There was some discussion about the PTIN and that preparers already used employer identification number and social security numbers. (See Attachment 2: email sent to Committee members dated 2-3-03 for further information.)

James Griffin - He suggests that a preparer request certification on the current year return for the next year. Preparers can get certified by experience.

James Grimaldi - Preparers already have PTINs. Any preparer can apply for a PTIN now. It's a good way to monitor preparers. Do we want it to be mandatory? He's not sure.

Larry Lexow - He is concerned about public awareness. He thinks that this may be better handled at the state level.

Diane Mignano - She states that clients don't know the individual and he or she may not be qualified to prepare returns.

Buck Paolone - He thinks that if a preparer has a PTIN that should mean that the preparer is certified. But that's not necessarily so. PTINs already exist.

Lillian Woo - There is a need for this. The recommendation is very broad. She thinks it will run into legislative roadblock. She should like to keep it simple. Advertise proper preparers. She thinks this may be far too complicated for Congress to address. Both the concept and the simple implementation of Jerry's PTIN suggestion are good and worth a try.

Sherry Whah - She would like to put up the following for a vote:

          Forward the poll to USA Today to be put out to the public.

There was discussion about the poll. USA Today would not give demographic poll. They have specific readership. It would be better to have Gallop do the poll.

Lillian mentioned that since the readership of USA TODAY is fairly homogeneous demographically, any response would not be a good representation of the nation as a whole. If USA TODAY conducts a telephone survey with its polling partners, CNN and Gallup, the results will better reflect the demographics of the country.

Sherry Whah's suggestion was accepted by consensus. Anne Gruber and Sherry Whah will work on the survey to get it worded correctly. It was mentioned that there was nothing on the survey about penalties. Anne Gruber will address that.

It was suggested that the poll also be taken to individual newspapers in the committee member's towns/cities. It was also suggested that it could be put on the Internet on a site such as AOL.

Anne Gruber will check with USA Today to see if they have a problem with giving it to other sources. It was agreed that the survey would be given to USA Today first.

Committee Comments
There were no comments.

Meeting was adjourned.

ATTACHMENT 1: Survey

Nina Olson, the National Taxpayer Advocate, recommended to congress in her FY 2002 Annual Report that Congress enact a registration, examination, certification, and enforcement program for Federal Tax Return Preparers. This program should consist of the following eight (8) components:

1. Definition: Federal Tax Return Preparer (FTRP) is someone other than an attorney, certified public accountant, or enrolled agent who prepares more than five (5) federal tax returns in a calendar year and satisfies the registration, examination, and certification requirements.
2. All FTRP who prepare more than five (5) returns for a fee must register with IRS.
3. IRS must develop four (4) exams that test knowledge and competency of individual income tax preparation, business income tax preparation, and annual refresher and update exams in both.
4. FTRP must pass initial exam in the first year and must also pass annual refresher exams.
5. IRS will certify those who successfully pass the exams.
6. IRS will advertise to inform public that FTRP must sign the return and display their registration card.
7. IRS will maintain a public list of FTRP who are registered and certified, registered and not certified, and those whose registration has been revoked.
8. IRS will notify any taxpayer who used an unenrolled preparer who is not registered, or registered and not certified.

Over 50% of taxpayers pay a tax return preparer to complete their income tax return. Many tax preparers are not required to meet minimum standards of competency. Anyone, regardless of training, experience, skill, or knowledge, is able to prepare federal tax returns for others for a fee. Currently, there are no national standards for a person to qualify to sell tax preparation services to the public.

"Do you believe that Congress should enact a registration, examination, certification and enforcement program for Federal Tax Return Preparers?"

ATTACHMENT 2: Email sent to Committee members from Jerry Gensiejewski dated 2-3-03 for further information.

Here is my preliminary thought on the licensing issue:

1. Require that all paid preparers obtain a PTIN (Preparer Taxpayer Identification Number)
2. On the PTIN application form: information garnered from applicants would include their credentials (I.e., CPA, Attorney, Enrolled Agents, others etc....), length of time they have been preparing returns, types of returns etc... Any other type of info the IRS wants that they think bear on the issue of who is preparing credible returns. The form would require a signature that if they fail to provide the PTIN they are assigned on any return, then the taxpayer for whom they prepare a return is not obligated to pay for such preparation and should report such to the IRS.
3. IRS should then engage in a marketing/awareness campaign that does one thing: makes people aware that if their return is prepared by a paid-preparer then they need to see the PTIN in a box on the return. If the number is not in the box when they pick up their copy of the return, then they should not pay for the return.
4. Over a period of years the IRS could compile statistics by groups of similarly credentialed PTIN holders. If the evidence warrants, then at that point they could require a national licensing program.

The goals of my suggestion:

1. Easy for taxpayers: The public will be able to hone in on what they are looking for -- a PTIN in a box, and if they don't see it, they don't pay for the return. I imagine that a free return will incite people to notice the number in the box.
2. Easy (OK at least "easier") for government: Devising a form and public campaign is certainly easier than establishing a national licensing and education requirement.
3. Easy for Preparers: Ask preparers to complete a form to get a number and sign it under penalties of perjury.
4. In time: it will give empirical evidence on strata's of return preparers and on individual return preparers. [Is it possible that the IRS computers could be used to determine which preparers are preparing "high risk" returns, i.e., returns with refunds > "x", high concentration of EITC claims -- and average refund?] Unscrupulous preparers probably have a higher EITC claim than scrupulous preparers.
5. Such a requirement may act as a deterrent for unscrupulous preparers -- because the public could threaten the preparer that they are not going to pay for the return -- because no PTIN. And even if they continue to prepare returns underground they may have less people willing to go to them. Those that continue to go to them know they are committing a crime and would likely continue to do so no matter what requirements exist.

These are just some thoughts I came up with as we were speaking on the call because I am not sold on the ability to institute a nationwide licensing program. I do agree, however, that something needs to be done.