IRS PTIN Registration – Who Needs a Paid Preparer Tax ID Number?

Oct 27, 2010
Lena Gott

: When Can You Apply for an IRS ID Number? - cohdra with MorgueFile

As of 1/1/2011, the IRS will require PTIN applications from paid tax preparers. Who is required to get a PTIN? Who doesn't have to get an IRS ID number?

The IRS estimates that there are somewhere between 900,000 and 1,200,000 paid preparers in the United States. New regulations finalized in late September 2010 will allow the IRS to keep tabs on every single one of them.

Currently, anyone can charge for preparing a tax return and isn’t subject to government testing. In the coming years, registered tax preparers will be held to professional standards, including testing requirements, and a code of ethics.

New IRS PTIN Registration Requirements – Who Has to Get a PTIN?

The article New IRS Tax Preparer Requirements introduced the new Paid Tax Identification Number (PTIN) rules. In that article, you will find the effective date of the new regulations as well as a discussion of the new fee structure plus exam and continuing education requirements.

As the 2010 tax return season approaches, would-be paid tax preparers will likely be scrambling to see if they can get out of registering for a PTIN. In a nutshell, most tax preparers will have to register. See below for a quick description of who qualifies for an exemption.

IRS PTIN Application Confusion – Who IS NOT Required to Get an ID Number?

The following individuals are not required to fill out a PTIN application before preparing 2010 tax returns in the 2011 filing season:

VITA Volunteers – The new regulations only apply to paid preparers, and VITA volunteers are not compensated for their services.
Corporate Tax Department Employees – Tax department employees are not considered paid tax preparers. They don’t have to register unless they have other clients.
Accounting firm assistants – A true assistant who only gathers data but does not prepare returns nor make determinations as to tax liability on behalf of clients is not required to register.

Registered Tax Return Preparer Rules – Who IS Required to Get a PTIN?

The following individuals must file for a Preparer Tax Identification Number:

Anyone who prepares a tax return for a fee, even if only one or two returns per year.
Tax associates in accounting firms – anyone who prepares all or most of a return for a fee and has the authority to make preliminary decisions related to tax liability, whether or not they sign the return, must obtain a PTIN.

New PTIN Requirements Demand Subjectivity

The bottom line is that an individual is required to register is he or she prepares all or part of a tax return and makes decisions that impact tax liability. People who only gather data, yet don’t actually use that data to produce tax returns, are not required to register.

Accounting firms and other tax preparation offices may find that only select employees must register; they just need to use this litmus test to determine who is required to do so.

New Paid Tax Preparer Rules – Who's Required to Complete IRS PTIN Registration in 2011?

It is important to note that whether or not a preparer signs the return has no bearing over whether he or she is considered a paid tax preparer subject to the new registration requirements. For instance, a tax preparer in an accounting firm who prepares a client’s federal income tax return and makes tax liability decisions, but who does not end up signing the return (because a tax manager does so), is still required to obtain a PTIN.

There is a very fine line between an assistant who must register and an assistant who is exempted. Anyone in doubt about this distinction should review the latest guidance available at irs.gov/taxpros.

Resources:

IRS News Release, IR-2010-099. New Online Registration System for Paid Tax Return Preparers is Now Available. Retrieved from irs.gov on September 29, 2010.

IRS Newsroom Article, FS-2010-1. Return Preparer Review Leads to Recommendations for New Requirements of Paid Tax Return Preparers. Retrieved from irs.gov on September 29, 2010.

Tax Professionals section of the IRS website, irs.gov/taxpros

TD 9503 (Final Regulations) – User Fees Relating to Enrollment and Preparer Tax Identification Numbers. Retrieved from irs.gov on September 30, 2010.