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CPA Balks at Renewal Fee in Proposed PTIN Regs

MAY 18, 2020

CPA Balks at Renewal Fee in Proposed PTIN Regs

DATED MAY 18, 2020
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Submitter Information

Submitter Name: Adam Steele

  • Docket ID: IRS-2020-0005

  • Document Type: Public Submission

  • Document Subtype: Public Comment

  • Status: Posted

  • Received Date: May 18, 2020


Comment

I am a Certified Public Accountant practicing, for the last 39 years, almost exclusively in tax.

I have read through the lengthy explanation, in proposed Reg. 117138-17, of the derivation of the proposed annual PTIN fees, whether for an initial application or a renewal, of $21 to the Service (IRS) and $14.95 to the "third-party contractor" that helps administer the program for IRS, as outlined in the proposed reg. I appreciate the mathematical complexity of the formulas from which these projected costs were derived, and also that GAAP was followed. We accountants generally like GAAP and sometimes we even use it ourselves.

However, to see the "forest for the trees", neither of these factors, in deriving the projected costs, and hence, fee, addresses the simple end facts that, on renewals, the PTIN doesn't change, and IT SHOULD COST NEXT TO NOTHING — certainly nowhere near $35.95 (total) — SIMPLY TO MAINTAIN A ROSTER OF THE SAME EXISTING PTIN NUMBERS. There is no "processing" necessary, except maybe to scan in the renewal app (of course, if the renewal is filed electronically, that's not even necessary).

In Montrois v. United States, 916 F3rd 1056 (D.C. Cir. 2019), the Court established that all that could be charged for in the said PTIN fee, was the cost of providing the "benefit" of having a different identifying number (other than the practitioner's Social Security number) to use on tax returns. In other words, simply the cost of maintaining a list of the alternate identifying numbers (PTINs), cross-referenced to the practitioner's other identifying information (like name, SSN, address, etc., which also don't usually change).

There are no costs of things like background checks, or verifying qualifications or credentials, as, after the Loving case (Loving v. IRS, 742 F. 3d 1013 (D.C. Cir. 2014)), there are no qualifications" to have a PTIN number. In Montrois, the Court (citing 80 Fed. Reg. 66,792 66,794 (Oct. 30, 2015)) wrote, "After Loving, the IRS no longer performs those functions [verifying qualifications]. Instead, the agency's PTIN-related services are now confined to generating and maintaining a database of PTINs."

It is, in fact, questionable whether the $35.95 fee is even justified in creating a cross-referenced (e.g. PTIN to name, address, SSN, etc.) roster entry on an INITIAL PTIN application, and this question will be further examined in Steele v. United States (case. no. 1-14-cv-01523-RCL) now pending, on remand, before the USDC at DC. In that case, the "third-party contractor", a firm named "Accenture Federal Services, LLC", did their darnedest to try to resist discovery and keep their actual costs out of the record; but they're now under an Order compelling disclosure, so this discovery will be forthcoming, and we should know later this year, what it actually (or, at least per their records) cost to "process" an initial PTIN application.

The problem with IRS's math is that, aside from general descriptions provided (e.g. labor, supplies, etc.), we don't know what (i.e. specific necessary goods, services, and amounts of same) went into "direct expenses," or "indirect expenses" ("overhead"). Determining that, and assessing the reasonableness of it, would require an efficiency audit. But the Accenture discovery (ante) may provide some info on what comprises those figures, and whether or not they are reasonable.

Certainly, though, a RENEWAL charge of $35.95 per year to simply leave the same information on the books, and perhaps have a computer re-order or re-alphabetize it (to merge it with the newly-issued PTINs) is highly excessive. The IRS's attempted computational justification of their proposed PTIN fees smacks of the old scandal over $640 military toilet seats. That cost might have been mathematically justifiable, too; but when all is said and done, we KNOW that toilet seats don't cost $640; just as we know that just leaving the same information in a computer database from year-to-year doesn't cost $35.95 per year.

Further, as concerns use of the "third-party contractor" to process applications and maintain a call center (as detailed in the proposed reg., Supplementary Information, Section E); I question whether the IRS (or the PTIN applicants) should be paying this high contractor fee, rather than IRS doing it internally. I would think that IRS would have the capability to do it themselves at a lower cost. After all, they are quite experienced in processing paperwork and seem to have systems in place to do it pretty well. AND they already have a call center. You can't get through most of the time, but other than that, it works pretty well, too. Apparently, IRS thinks it's good enough for people trying to file their taxes, so it should be good enough for PTIN questions, as well — the PTIN application (W-12) is a lot simpler than a form 1040.

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