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Discussion:Texas, Peer Review and Tax Practice

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Discussion Forum Index --> Business Growth Community --> Texas, Peer Review and Tax Practice

Bilbo (talk|edits) said:

16 September 2012
I am thinking of getting back into practice here in Texas. As I look at what that practice may be, I am again thinking about the TSBPA, and its rules regarding Peer Review.

When I last left the arena, there were some small practicioners that only printed a TB for doing tax work and did not print client financial statements. Some of them did provide some controllership work but again didn't print the statements. They considered themselves outside of the Peer Review process.

I kept a few clients for a bit that was tax prep only and then I had one that just put me on the payroll as a "part time" controller. I kept his books but as an employee, no peer review was required.

Looking at the terrain now, it looks like the rules have tightened up. Any kind of write up work qualifies one for a peer review, and I am not sure it matter if one prints a financial statement or not. Is that right? In Texas, the TSBPA is explicit that there is no exemption for management only SSARS8 type engagements.

On the TSBPA website, I even see the language:

"*Compilations include financial statements prepared as a result of other services such as taxes, bookkeeping (either computer or handposted), personal financial planning, etc. "

However, I thought that part of what SSAR 8 did was to amend SSAR 1 such that prepared was no longer just adjusting the client's books. The AICPA in its "Practical Guidance for Implementing SSARS 8" list several examples illustrating:

    1.  A tax return is not a financial statement
    2.  A Trial Balance is not a financial statement
    3.  A Trial Balance with Tax Adjusting Entries (TAJEs) are not financial statements
    4.  Making a material modification to client financial statements are not financial statements prepared by the CPA
    5.  The CPA makes TAJE and prints the resulting financial statement to give to the client with the tax return; he didn't prepare a financial statement - he just did bookkeeping.

So..... if I take a QB file, alter it to reflect MACRS depreciation, reclassify some partner draws, and reclassify "Truck payment Expense" to a reduction in note principle and interest expense, have I prepared a financial statement. It looks like I have not according to the AICPA - but with TSBPA? I am not sure. Any ideas?

I suppose I could biforcate the practice and just give the write up work to my wife; I would do the tax work. That seems a bit cumbersome but I am not gung ho about peer review to do a few QB writeup clients and a bunch of 1040s, 1120s, and 1065s. Maybe in five years when the practice is more substantial.

At one time I had an office registered just for a few tax returns. It was cheap. Now the TSBPA requires that those with an office registered also have peer review unless they are approved by the board as an exception. To do that, the CPA must swear in two different attachments that he isn't required to participate in peer review...

BTW - the peer review process in Texas is somewhat of a racket. If you want a peer review, you have to go the the Texas Society. The board doesn't recognize anyone else so it is difficult to get any competition going.

Maybe I should give them back the CPA license and become an EA :).

Any thoughts?


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