Most taxpayers want paid preparers licensed

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate


Is a tax preparer helping you file your taxes this year? If so, are you comfortable with that person’s abilities?

Apparently, most of us are at least a bit concerned about the abilities of tax preparers, at least in general if not about our own tax adviser, according to a new national poll.

A Consumer Federation of America, or CFA, poll released Jan. 20 finds that 80% of taxpayers believe that paid tax preparers should be required to pass a competency test.

Another 83% say that paid tax preparers should be licensed by the state where they practice.

The cost of tax pro errors

The reason for more oversight is the usual one: Money.

Tax return filing represents for most people their largest financial transaction of the year.

“Errors on tax forms put consumers at risk of fines and lost tax refunds,” says Tom Feltner, director of financial services at CFA.

However, notes CFA Senior Policy Advocate Michael Best, only 4 states — California, Maryland, New York and Oregon — regulate tax preparers who aren’t otherwise covered under other professional credentialing programs.

A growing problem

CFA says that multiple rounds of mystery shopper tests over 3 years found instances of tax preparer incompetence and even fraud. The nonprofit group found problems in 24% of the tax returns in a 2008 test, 44% of returns in a 2011 test, and 93% of returns in a 2015 test.

The dramatic increase in issues with tax returns is in part because of new and changing tax laws over the years. Also, the focus on earlier investigations was the price charged for preparing tax returns rather than the accuracy of the filings, according to Chi Chi Wu, staff attorney at the National Consumer Law Center and co-author of 4 tax return testing reports.

Still, other studies also indicate tax return accuracy problems among paid preparers.

Government Accountability Office undercover investigators in 2014 went to 19 randomly selected tax preparer offices. Only 2 of the 19, or 11%, of the returns had the correct refund amount.

State vs. federal oversight

The Internal Revenue Service has tried in recent years to implement more oversight over paid tax preparers who aren’t already receiving training and credentials from other professional groups.

Those efforts, however, were struck down by federal courts that ruled only Congress could grant the IRS authority to regulate tax preparers. Now the IRS is relying on a voluntary education program for tax professionals.

And while there has been some sporadic movement on Capitol Hill toward giving the IRS the ability to set stricter tax preparer rules, that effort has stalled. So the CFA and other consumer groups now are focusing on state-by-state tax preparer regulations.

Eventual IRS oversight is a possibility, says Best, “but the timeline is extremely uncertain. It behooves us to focus on state levels.”

In the meantime, if you don’t live in a state that regulates paid tax preparers, it’s up to you to make sure the tax pro you hire is up to the task.

Do you get professional tax help? Have you ever had a problem with your tax pro?

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Filing, Withdrawing, and Managing IRS Authorizations

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!



Clients need their CPA to have the appropriate authorization to communicate with the IRS on their behalf. Whether they are selected for an audit, assessed a large penalty, or simply need a transcript to determine what payments were made this tax year, clients rely on CPAs to address their tax issues. Most practitioners regularly use a power of attorney (Form 2848, Power of Attorney and Declaration of Representative) to represent their clients. However, other types of IRS authorizations have practical uses. And, at times, it may make sense to obtain more than one type ofauthorization.

Form 8821

Form 8821, Tax Information Authorization, is used to obtain taxpayer information. It does not hold the same weight as Form 2848 (i.e., Form 8821 does not allow a practitioner to represent a client in any way). However, if a practitioner has this type of authorization, he or she is equipped with the tool to call the IRS and obtain information such as client transcripts, payments made on the account, filing status, and more.

A benefit of a Form 8821 authorization is the ability to use less-expensive staff to call the IRS and obtain IRS account information. If a practitioner lists his or her firm’s name as the appointee on Form 8821, anyone from the firm may call the IRS and obtain information about the taxpayer. For example, the firm’s secretary or bookkeeper, instead of the tax manager or partner, could call the IRS to obtain a client’s transcript. Considering that call-wait times have increased steadily in line with recent cuts to the IRS’s budget, using less costly staff to make basic IRS phone calls can be beneficial.

Additionally, as a proactive measure, practitioners should consider having a Form 8821 on file for all clients (even clients that do not currently have any tax issues). This is because Form 8821 allows the appointee to be copied on all IRS correspondence. The appointee will then receive a copy of a client’s notice at the same time as the client—allowing the practitioner the opportunity to determine how the client should address the matter. After all, sometimes clients ignore an IRS notice or do not understand its severity.

Checkbox Authorization (Third-Party Designee)

A CPA can complete the “Third Party Designee” section on a client’s Form 1040, U.S. Individual Income Tax Return(often referred to as “checkbox authority”). This allows the CPA to discuss the processing of the client’s tax return, including the status of tax refunds. This authorization has limited use but may be worthwhile to ensure a return is correctly processed.

How to Complete Forms 2848 and 8821

Completing Forms 2848 and 8821 is fairly straightforward. A practitioner needs to have:

  • Taxpayer information (name, address, taxpayer identification number, and phone number);
  • The practitioner’s information (name, address, Centralized Authorization File (CAF) number, preparer tax identification number (PTIN), telephone number, and fax number); and
  • Tax information (type of tax, tax form number, years or periods, and specific tax matters, if applicable).

A practitioner will need to enter a CAF number to complete the forms. A CAF number is a unique nine-digitidentification number assigned to a practitioner the first time he or she files an authorization form with the IRS. A CAF number is different from a Social Security number, employer identification number, or PTIN.

CAF Number Tips
  • If practitioners do not have a CAF number, they may enter “none” in the CAF number section on the form, and the IRS will assign one.
  • If practitioners forget their CAF number, they may call the Practitioner Priority Service line at 866-860-4259866-860-4259 FREE. Once authenticating information is provided, the IRS representative can usually provide the CAF number over the phone.
Where to File Forms 2848 and 8821

Practitioners must mail or fax their authorization forms to the applicable CAF unit (Ogden, Utah; Memphis, Tenn.; or Philadelphia) unless they check the box on line 4 of Form 2848 or 8821 (specific use not recorded on the CAF). In that case, the practitioners would mail or fax the form to the office handling the matter.

Unfortunately, with the retirement of the online Disclosure Authorization product in 2013 (which allowed practitioners to file Forms 2848 and 8821 electronically), mailing or faxing these forms are the only filing options.

Tip: If a client has an urgent issue and the practitioner does not have time to wait for the authorization to be recorded at the CAF unit, the practitioner may call the IRS and scan and fax the authorization form to the agent who takes the call.

Withdrawing Form 2848 or 8821 Authorization

Practitioners may withdraw an authorization at any time. To do so, they must write “WITHDRAW” across the top of the first page of the Form 2848 or 8821 with a current signature and date below the annotation. Then they must provide a copy of the authorization form with the withdrawal annotation to the same CAF unit where the form was originally filed. The instructions to Form 2848 provide additional steps to take if practitioners do not have a copy of the authorization form. A taxpayer may also revoke the authorization at any time by following procedures similar to the withdrawal steps.

A new authorization supersedes an existing authorization unless otherwise specified on Form 2848 or 8821. Authorizations also expire with the taxpayer’s death (proof of death is required).

Obtaining a Listing of All Authorizations on File With the CAF Unit

It is advisable to keep a list of all client authorizations that a practitioner has open with the IRS. But, at times, a practitioner may need to obtain that list from the IRS. For example, a retiring CPA may wish to withdraw all authorizations on file with the CAF unit. To do so, the CPA may first make a Freedom of Information Act (FOIA) request for a CAF representative/client listing. This is known as a “CAF77 request.” A sample FOIA CAF77 letter is shown on the IRS’s FOIA Guidelines webpage.

The IRS will then provide a printout or electronic copy of all of the CPA’s current authorizations. The CPA can send a signed withdrawal request for all authorizations. The CAF unit will then delete the authorizations attached to thatCPA.

Other Resources

For additional guidance on IRS authorizations, refer to the following resources:

  • Publication 4019, Third Party Authorization, Levels of Authority: This publication provides a nice summary chart of various types of authorizations (purpose, how authority is granted, etc.).
  • Publication 947, Practice Before the IRS and Power of Attorney: This 19-page publication provides information about practicing before the IRS.
  • Form 56, Notice Concerning Fiduciary Relationship: This form is used to authorize the designated person to perform any act on the taxpayer’s behalf (i.e., he or she is a fiduciary under Sec. 6036 or 6903).
  • The CAF authorization rules: The IRS CAF webpage (available at provides detailed guidance on CAF rules and processes.
  • Internal Revenue Manual (IRM) Section 21.3.7, Processing Third Party Authorizations Onto the Centralized Authorization File: This IRM section applies to IRS employees responsible for performing CAF account work, but the information may also be useful to tax practitioners to understand the IRS’s procedures.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Advice to Accounting Students: Words of Wisdom from a CPA

We recently had the opportunity to share our best advice for aspiring CPAs in a guest blog with “The Finance Writer,” Brian Huber.

advice for students in finance from westchester accountant

Get started on the path to success as a finance student with these tips!

With a new year just beginning, we think about how this time of year somehow seems to breathe new life into people, shining a refreshing light on the goals and dreams that await us. Whether you’re a freshman or senior accounting student, taking these tips with you as you enter the brand-new year is one sure way to setting yourself up for success as a future CPA. Read on here  to discover our recommended best practices for finance students!

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Armonk NY, Bedford NY, Chappaqua NY, Harrison NY, Mamaroneck NY, Scarsdale NY, Greenwich CT and beyond.

 Photo Credit: Ian Sane via Photopin cc

How and Why I Hired My Tax Accountant


Until I owned my business, I had always prepared my own income-tax returns. No longer. I’m glad to say that I have an accountant.

 Finding the right person wasn’t easy. It took me time and some personal evaluation to decide on the best one for me. Here’s the process I went through.

Scarsdale CPA tax tips

Gambling with your income tax is one move you never want to make

First, I considered doing my own taxes — for about a nanosecond. I had always prepared my tax returns. Since I had only my income, and then my wife’s, to report, the process was straightforward. A couple of hours using tax software, and I was ready to file with the Internal Revenue Service.

That changed when I bought my hobby-and-game store. The complexities of owning a business and all the tax rules that come with it made the job much more difficult.

I realized this after spending hours on the phone with various city and state agencies trying to compile the tax-identification numbers needed to apply for a bank loan. I was astonished by how many taxes a small-business owner has to pay. Assessments may be levied at the city, county, state and federal level, and the rules and regulations change frequently. Complicating matters, a separate identification number is required for each tax. Failing to file just one of the returns triggers a penalty, something I didn’t dare risk.

In short, I quickly concluded this was no job for an amateur. Plus, for small-shop proprietors like me, time is money, and unless I hired a professional, I’d be doomed to taking the latest tax-preparation class instead of focusing on my business.

To find the right accountant, I first considered hiring a friend. I knew one accountant personally. He’s someone I hung out with during college, but he lives in another state. So I initially dismissed the thought of hiring him since I felt it would be better to have someone local.

I then interviewed several firms in my area. These ranged from independents to local offices of the Big Four. My criteria for choosing a firm were the amount of service I’d receive, the fees involved, their general philosophy and approach, and something I’ll call the “personal touch.”

Most of the firms offered similar services, such as federal-tax preparation and filing monthly local and state taxes, with a couple specializing in particular areas such as payroll taxes. The range seemed somewhat dependent on the size of the accounting firm, with the larger firms offering “one-stop” service — they’d do all my tax work — compared to the small outfits, which would do only payroll taxes. But hiring a big firm didn’t necessarily mean I’d be working with the most experienced people. Although I was meeting with the partners of the large firms, I learned lower-level staffers would do the work, and the “senior” accountants would simply sign off on it.

As for fees, I’d be charged by the hour, at rates that also varied by size of the firm. Although I expected some variance in the fees, I was surprised by the disparity. The larger firms charged between $150 and $300 per hour, while smaller ones cost between $75 and $100 an hour. For a small company like mine, paying $300 an hour isn’t an option.

In regard to tax strategies, I looked at how aggressive the firms would be. One accountant asked whether I had children. When I said I’d just had a baby boy, he started to pitch me on a tax shelter for my son. He said he had just read about it, and although the IRS had not ruled on it yet, he told me he thought it would likely get a favorable ruling. While I’m all for accountants being aggressive about seeking deductions, I wasn’t sure that my then-one-month-old son should be involved.

Finally, and most important, there was the personal touch. Financial decisions are touchy. Consider that disagreements over money are among the top reasons for divorce in the U.S. If discussing money is so difficult with your spouse, how are you going to talk candidly about finances with a stranger?

I sensed that my accountant would be my closest business confidant, and that when all was said and done, I needed to work with someone I could trust. I decided to forgo my prior requirement for proximity and hire my friend from college. John Reasbeck (a.k.a. Reas) and I have stayed close since graduation even though he lives in West Virginia and I’m in Kentucky. We’re the same age (32) and at the same point in our professional lives. He has been an accountant since leaving college and consequently has years of experience to offer me.

An accountant can — both directly and indirectly — drastically influence the success of a business. I already trusted and confided in Reas and knew he had my best interests at heart. Never mind that he wasn’t a “senior tax partner.” Those people weren’t going to be doing my work anyway. And the price is right at $100 an hour.

One year later, I know I made the right decision. My accountant-friend is a key member on my advisory team, not someone who just keeps track of my statements and prepares my year-end taxes. We talk by phone once or twice a week, but not necessarily about taxes. Often I seek his feedback on business ideas, such as possible expansion opportunities.

Some might question the wisdom of hiring an accountant from out of state. But West Virginia and Kentucky are adjacent states, so their rules tend to be similar, and my accountant has several other out-of-state clients. Still, if I weren’t comfortable with reading tax documents, I might feel differently, because agencies send notices and coupons directly to me, and I handle some of this work myself. But I have a finance background, and I already take care of tasks like bookkeeping and reconciling bank statements on my own.

I dislike organizing the paperwork (mostly receipts) necessary for me to properly file my taxes. But after seeing the results, I’m more than happy to pay my accountant’s bill because he’s saved me time and minimized my year-end taxes.

Westchester CPA Paul Herman is here to assist you with all of your personal finance needs. Please contact our Westchester accounting firm for all inquiries. We proudly serve the towns of Scarsdale NY, Purchase NY, Larchmont NY, Mamaroneck NY, Katonah NY, Bedford NY and beyond.


Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.