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September 3, 2010

Timothy F. Geithner
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Sir:

The National Society of Accountants (“NSA”) is a voluntary association of certified public

accountants, enrolled agents, licensed public accountants, tax practitioners who are licensed
by state agencies, and accountants and tax practitioners who hold credentials from a
nationally recognized credentialing body. NSA and its affiliated state organizations represent
more than 30,000 practitioners who provide accounting, advisory and tax related services to
more than 19 million individuals and small businesses. In short, NSA represents accountants
and tax professionals who serve Main Street rather than Wall Street. We have been on record
favoring registration of tax preparers since August of 2002 and that policy continues today.

We are aware that some individuals have recently expressed concern about the proposal to
regulate tax return preparers and specifically requested 1) an exemption for staff members of
CPA firms and 2) a delay in the implementation of tax preparer examinations as envisioned in
the proposal. NSA does not believe that either of these requests serves the public interest.

Speaking about the tax preparer regulation proposal, IRS Commission Shulman has said,
“The goals of the strategy are to improve service to taxpayers, increase compliance, and
enhance the integrity of the overall tax system. I think this creates leverage for us, and is a
smart use of our resources.” NSA agrees.

Therefore, we oppose any proposed loophole exempting CPA firms and their members or
employees from the registration and testing requirements applicable to all other preparers.
And, since the testing portion of the proposal is phased in over a period of years, we find no
merit in the request for a delay.

First, we are unaware of any uniform definition of “CPA firm.” This can vary from state to
state and there is currently an ongoing discussion among state boards of accountancy about
the use of fictitious names by businesses owned and operated by CPAs. Because of this non-
uniformity, it is entirely possible that “CPA firm” can be something no one envisions. For
example, we are aware that an individual who is a CPA owns and operates more than forty H
& R Block franchises. Would any or all of these separate offices be considered a “CPA firm”
for this purpose? Would this be considered one firm? And to take it one more step, how
would this proposed exemption be applied when tax return preparation is outsourced to
foreign tax preparers by a CPA firm? We do not believe consumers would derive any benefit
by exempting tax preparers working under these circumstances from the registration and
testing requirements applicable to all other preparers.

Moreover, why is it good for consumers or good tax administration policy to provide
registration and testing exemptions for one business and not for another business providing
the same service? Is it possible that those seeking a “CPA firm” exemption are, in reality,
merely seeking a competitive advantage over other preparers? Tax preparation businesses
owned and operated by enrolled agents would be subject to the same “significant and
unnecessary burden” cited as a reason by those seeking a CPA firm exemption but they are
apparently quite willing to allow enrolled agents – or attorneys and un-enrolled preparers, for
that matter – to be subject to these costs.

In addition, the proposed “CPA firm exemption” would exempt not the signing preparer but
those employed by the signing preparer who actually do the work in preparing the return.
Therefore, a small CPA firm that does not have the luxury of having a cadre of non-signing
preparers would have to register a higher percentage of its personnel as preparers than a large
firm. NSA believes that providing a benefit to a large firm at the expense of small firms is

We do not believe the IRS should use its administrative rulemaking capability to provide a
competitive advantage for one business at the expense of other businesses offering the same
or similar services.

Allowing non-signing incompetent preparers to go from one CPA firm to another without
oversight by the IRS is a disservice to taxpayers. An incompetent preparer may not know the
returns he has prepared are flawed and is therefore unlikely to tell a future CPA firm
employer of any return preparation problems. With registration, however, the IRS would
have the ability to track an incompetent preparer by a PTIN number and prevent difficulties
for future taxpayers. As stated in the Commissioner’s Tax Preparer Review
recommendations, PTIN registration will allow the IRS to “more easily locate and review
returns prepared by a tax return preparer when instances of misconduct are detected.” We
believe this is a benefit for consumers and another reason we oppose this proposed exemption.

We are also unconvinced that regulation at the state level is sufficient to warrant exemption
from the registration and testing requirements. Despite the assertion that state boards of
accountancy regulate the activity of accounting firms as well as individual CPAs, it is hardly a
secret that state boards, like all other state entities during these difficult economic times, have
budget problems and virtually no funds for enforcement. State boards do not regulate federal
tax returns and have no individuals assigned to routinely review such returns, even if they are
able to secure copies of the returns from the taxpayer, which is unlikely. The Peer Review
programs established by state boards of accountancy in most jurisdictions make no provision
for reviewing tax preparation engagements. In any event, we are confident the shareholders
of Enron, WorldCom, Waste Management, etc., did not take any comfort in the knowledge
that the CPAs auditing these companies were regulated at the state level. NSA believes that

the regulation of federal tax return preparation activities should be conducted at the federal
level and that all preparers, whether foreign or domestic, who hold themselves out as
professionals in this line of work should be willing to submit to IRS scrutiny of their work
product. This would include any foreign individuals to whom a tax preparer outsources tax
return preparation work if such individuals are considered tax preparers because they prepare
all or substantially all of a return.

We look forward to partnering with the IRS to ensure the smooth implementation of the PTIN
registration requirement as set out in the proposed regulations. We believe this will benefit
taxpayers, increase compliance, enhance the integrity of our tax system and help reduce the
tax gap. However, if serious thought is given to providing a CPA firm exemption, in the
interests of fairness and to avoid providing preferential treatment to any segment of the tax
return preparation industry, we respectfully request similar firm exemptions for all firms that
have complied with existing regulations for Electronic Return Originators (EROs).

You may contact me for further information by email at

or you may contact John Ams, NSA Executive Vice President, at


Donny Woods

cc: Douglas H. Shulman, Commissioner, Internal Revenue Service

Mark Ernst, Internal Revenue Service
Karen L. Hawkins, Internal Revenue Service
David R. Williams, Internal Revenue Service
Richard S. Goldstein, Internal Revenue Service
Nina E. Olson, National Taxpayer Advocate
Members, House Committee on Ways and Means


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