A TAX PROFESSIONAL DISCUSSION: REQUIRED ETHICS CPE
I began a discussion among tax professionals with my post “Fine Whine” at THE WANDERING TAX PRO. Here is what I posted –
A while back I discussed the NATP Year End Tax Update Workshops” in a post at my tax blog THE WANDERING TAX PRO. My description of the first day of classes, known as “The Essential 1040”, included the following -
“And, of course, the annual 2 hours of redundant ethics preaching. No reflection on the seminar leader, but, for me (not legally required) this is a total waste of 2 hours, and I usually zone out or daydream during most of the presentation.”
I have also complained in the past that this 2 hours of redundant ethics preaching can actually turn into 4 or 6 hours of wasted time each year, as most organizations who offer day-long CPE sessions feel they must include 2 hours of ethics preaching, regardless of the intended main topic, to insure maximum enrollment.
Forced ethics CPE will not reduce tax fraud! I have said time and time again over the years that if a person is crooked, forcing him or her to sit through 2 hours or redundant ethics preaching every year ain’t going to turn him or her honest!
I have been preparing 1040s for over 40 years. If I ain’t honest by now – and I probably wouldn’t have been able to remain in business for 40+ years if I were not – a 2-hour class ain’t going to perform a miracle.
This annual 2-6 hours of redundant ethics preaching not only wastes our time but also our money – we are paying for 8, or 16, or 24 50-minute CPE hours of actual tax return related education, but are only receiving 6, or 12, or 18 CPE hours!
I recently wrote an article for the NJ-NATP chapter newsletter on the newly required 4 or 16 hours of tax-related CPE for “unenrolled” tax professionals who want to prepare New York State tax returns. There is an ethics component in these required classes as well, which is truly redundant. Thankfully they only waste time and not money, as the classes are offered online for free.
I do not need to take basically the same class on depreciation each and every year. I only need to be told of any new depreciation-related law or developments. So why am I forced (although not actually required) to sit through 2 hours of ethics each and every year to be able to properly prepare 1040s? If there is a true change or new development in the area of ethics or preparer penalties that it can be mentioned along with other new law or development as part of the annual update class.
The forced inclusion of 2 hours of redundant ethics preaching in the annual “The Essential 1040” presentation can actually diminish the benefit of the class for tax preparers. The discussion of important topics can be cut short, and/or one or more court case, or new revenue ruling or other development, although included in the text, is often skipped over in the classroom presentation and discussion, when it really is important enough to be reviewed in detail, because the instructor must be sure to have 100 minutes left at day’s end for the ethics nonsense.
Here are some of the responses I received to my post –
“Exactly my sentiments. Two day long workshops recently and I've already had to sit through 4 hours of ethics. I would rather have my time more wisely spent learning about tax law.”
John T Maxwell
“I agree 1000%. What a waste!!!! The people that would benefit don’t attend NATP seminars.”
Francis M Cassidy
“Thank you for posting this. I do agree with you. It seems like so much a waste of time..... On the other side of things though I think it is sort of like preaching the gospel. So many evil and lawless ones just go on to their own destruction. Then, however, there is that one or two that "get it" and turn from their lawlessness. I endure it for those that turn, but agree with you, it is frustrating.”
“As always my thought on this is simple and unwavering. You can teach ethics all you want, but to be ethical is not something at our age we will learn more of… As a preparer, we are either ethical or we are not. It’s a waste of money for sure, as well as my time.”
“ . . . while the IRS can mandate we take ethics, there’s no way it can force all tax preparers to be ethical. As long as money is involved in something there will be disreputable people attempting to take that money in unethical ways. Licensed tax professionals have committed crimes in the past and will in the future; that’s reality.
Do I think tax professionals should be ethical? Of course. The problems with the mandate are:
Every tax professional pretty much knows what ethical behavior is;
* The Code, regulations, and other guidance vis-à-vis ethics doesn’t change annually
* If a tax professional who has been through ethics hears the same things (e.g. Section xyz of Circular 230 says that you must use 12-point fonts….) the professional tends to tune out the presentation; and
* The bad (unethical) “professionals” will ignore ethics even if they had to take 24 hours of ethics C.E. each year.
That said, this mandate isn’t going anywhere. It sounds and looks good, so I see a 0% chance that the IRS drops it.”
Russ Fox (author of the Taxable Talk blog)
“I get that ethics for those of us who are ethical is a total waste of time. But what about that one person in the crowd that is a newbie and really didn't know what they should and should not be doing. I think due diligence is a very good topic - it is an ethics topic - and it is a good outline for what we should and shouldn't do. Many seasoned preparers become lax and forget to ask those important questions. I have a responsibility to ensure that the return I am filing is accurate and if I don't do my due diligence how will I know?
But I do see your point that annually is a bit much. For CPAs in NJ, you need a four hour class once every three years.”
“I have run into newer preparers who REALLY needed to listen to the ethics sessions. People who didn't have devious intentions, but were collecting refunds into their own accounts and things similar to that. There is a need for ethics, but I agree that the requirement for 2 hours per year could be relaxed. Perhaps 2 hours annually for the first 3 years and then 2 hours per 3 years thereafter.”
As you can see, most tax professionals agreed with my assessment. Forcing tax preparers to sit through redundant ethics preaching each and every year is a total waste of time and money, especially for those preparers who are not required to take ethics CPE. Unfortunately, as Russ Fox wisely pointed out, it sounds good, and doing so makes it look like the IRS, or whoever, is actually doing something positive about addressing the issue of tax fraud.
Marilyn Ayers and Jaimee Hammer do make a good point with “But what about that one person in the crowd that is a newbie and really didn't know what they should and should be doing” and “I have run into newer preparers who REALLY needed to listen to the ethics sessions”.
Perhaps the first year, and the first year only, that a person is required to take CPE to maintain a license or credential there should be a 2-hour ethics requirement. And this course should be a separately offered session, perhaps provided exclusively as a live online class (which would allow for real-time questions from participants). But, at most, any subsequent required ethics preaching should be limited to a one hour update every 3 or 4 years – with the years specifically identified (such as 2017, 2021, 2025, and so on) so that multiples of one hour of ethics are not stuck on to day-long seminars every year.
Most tax return errors, on both 1040s from paid preparers and returns that are self-prepared, are a result of the convoluted mess that the US Tax Code has grown to become. And most fraud is the result of improper attempts by Congress to distribute government welfare and other benefit programs via the Tax Code through the use of refundable credits. Teaching ethics will not reduce erroneous, or fraudulent returns. Only simplifying the Code – in my opinion rewriting it from scratch – will fix the problems.
Fellow tax pros, please join the discussion. Email your comments to me at [email protected] with “TAX PRO DISCUSSION” in the subject line.