Professor Elam

First, remember that CPAs lost their ability to regulate themselves withe the passage of Sarbanes Oxley. 

The Board making the rules now has a majority of non  CPAs. And the PCAOB's budget is determined by the SEC, and as we know, he who makes the budget makes the rules. 

Now the IRS will register all tax preparers who are not already Attorneys or CPAs. 

My recollection is that there were considerable regulations passed with the 1986 Tax Act. But like everything else the Administration is doing, I suspect there is an ulterior motive, particularly for CPAs. Like that famous frog in the boiling water who fails to jump from the pot, do CPAs not see what is coming?

CPAs basically perform three functions. 

1. Prepare tax returns

2. Prepare forward looking statements to assist in obtaining bank loans.

3. Prepare audits, reviews, compilations, agreed upon procedures. 

Okay here goes. The new announcement specifically states that tax preparer numbers will be used to 'track down' (as though one were hiding out in Somalia) the ones who make large numbers of errors, fraudulently or innocently   The 'or' is important. The Federal Government could care less why or how the error was made. I suspect they will take the view that any error is an affront which will quickly grow to an illegal act against the government. Any tax preparation that results in less tax than might have been collected is illegal. Such a preparer will be guilty of at least civil if not criminal activity. 

Bank reliance on Financial Statements which result in loan losses will be contrary to the public interest. The reason is that the FDIC insures the banks. If enough losses occur, the Feds have to stand good for the deposits. Well then, submitting a statement that results in a loan loss is contrary to the public interest and it is not a stretch that, yes, this is civil or criminal activity. 

Finally, the number and scope of audits gone bad, not to mention the other procedures, has led to the destruction of companies which has led to bailouts, again the Feds were the ultimate insurer for the public interest. So once again, production of reports leading to failures is adverse to the public interest. 

So the Federal view, in my opinion, is that CPAs are basically faux Federal Contractors. It is their job to help collect taxes, not advocate tax avoidance. After all the reason that CPAs were exempted from registration is that, handily, they are already registered and regulated. 

Now couple that with the new Federal salary guidelines. The Administration has already picked a number, $250,000. And yes friends, that is where I think this is going. While there are not many CPAs that make over $250,000, expect there to be even fewer in the future.