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Tuesday, Oct 4, 2022

Agents Using Term ‘Certified’ Doesn’t Add Up for CPAs

Mike Paek has been doing taxes for customers in Koreatown for more than 10 years.

But he’s not one of the 300 certified public accountants who cater to L.A.’s Korean-American community, the largest in the country. Instead, he is what’s known as an enrolled agent – authorized to do tax preparation and bookkeeping but not other CPA-only services such as auditing.

For a long time, enrolled agents and CPAs managed an uneasy co-existence, offering overlapping services in Koreatown. But as the downturn has shrunk their revenue, they’ve become embroiled in a fight over advertising.

“It’s a turf war,” said Paek, who prepares taxes for Korean-American businesses and individuals from his office on Wilshire Boulevard. “They see us as a competitor, but this is no way to go about it.”

Paek and others have been attacked by Koreatown’s CPAs who claim enrolled agents are unfairly moving in on their territory in Korean-language directories and newspapers. The dispute comes down to a matter of translation: For years, Paek and others have advertised using the phrase “kong in sae moo sa,” which he claims translates to “licensed tax specialists.” But Korean CPAs complain the phrase actually means “certified tax accountant,” violating state laws that ban non-CPAs from using the word “certified.”

The dispute heated up last month when the Korean American Certified Public Accountants Society of Southern California, which has more than 300 members, sued 16 Korean enrolled agents in Los Angeles and Orange counties. The CPAs claim their rivals were using misleading advertising and causing them to lose business.

“They hold themselves out using this title that confuses the public,” said Benjamin Koo, a KACPA member who also is representing the organization as its attorney. “They want to place themselves in the same category as a CPA. Who knows, soon they might be calling themselves attorneys, too.”

Koo convinced 10 other Korean-American enrolled agents to stop using the disputed phrase in the pages of publications such as the Korea Daily newspaper or the Radio Korea Business Directory by sending them a cease-and-desist letter. The 16 who are being sued didn’t comply with the letter.

One thing both sides agree on is that business has been sluggish since the downturn. And new tax and accounting professionals targeting local Koreans continue to open their doors, increasing competitive pressure.

“There’s more and more competition, and (the CPAs) think we’re taking away their business,” said Paek, the enrolled agent. “My business is hurting, just like everyone else’s.”

Koo, the attorney-CPA, said he’s seen a similar crush of attorneys in Koreatown, and attributed the overflow of service professionals partly to the predisposition of Korean immigrants toward starting businesses instead of working as employees.

Enrolled vs. certified

Even without translation problems muddying the issue, the difference between enrolled agents and CPAs can be confusing.

There are about one-eighth as many enrolled agents as there are CPAs in the United States. Enrolled agents pass a two-day exam to prove their familiarity with tax laws. CPAs, on the other hand, take accounting and business courses, earn a bachelor’s degree, and spend at least one year working under the supervision of a licensed CPA in California. They also need to pass an exam that covers not just tax law but auditing, business concepts and financial reporting.

But the difference between the two doesn’t really matter to the average Korean-American client in Los Angeles, according to Paek, because the services in demand are usually just tax related.

Friction between the two sides in Koreatown goes back at least 10 years. At first, Koo said, the enrolled agents just listed themselves as “sae moo sa,” meaning either “tax specialist” or “tax accountant.” Korean CPAs griped about it even then, but didn’t take much action. Enrolled agents then drew more complaints by adding in another phrase that can mean either “licensed” or “certified.”

The lawsuit states that in 2008, one enrolled agent wrote an article in a Korean-language newspaper defending his right to use the disputed term.

At about the same time, Korean CPAs pleaded their case to the California Board of Accountancy and the Internal Revenue Service, but the arguments over translation made it hard to get much traction. That’s when the 28-year-old KACPA finally sent the cease-and-desist letters and filed suit against the agents who didn’t comply, Koo said.

“Korean CPAs are very conservative and don’t like fighting or conflict,” he said. “They tried to persuade (the enrolled agents) again and again, but they are adamant about using this term.”

The legal fight has had the effect of mobilizing Korean enrolled agents, who previously operated as lone wolves. Most of those being sued have banded together to hire an attorney, and vow to fight the lawsuit, which is in Los Angeles Superior Court. Two weeks ago, they revived a long inactive organization, the Korean American Society of Enrolled Agents. So far, more than 30 enrolled agents in Los Angeles and Orange counties have joined.

One of those is Ken Kim, an enrolled agent based in Northridge whose clients are mostly Korean immigrants.

“The lawsuit was definitely a factor (in joining),” Kim said. “We haven’t had any association up to now, but we felt we needed some sort of group representation.”


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