- Learn New IRS Rules for Tax Preparers - cohdra with MorgueFile
On September 28, 2010, the IRS announced issuance of groundbreaking final regulations related to paid tax preparer requirements. The announcement didn’t get much media exposure, but it should gain traction as tax season nears. Why? Because these final regulations are relevant to every single paid tax preparer in the United States and the individuals who seek their tax services.
New IRS Tax Preparer Requirements – Paid Professionals Must Register for a PTIN
Beginning January 1, 2011, anyone who wishes to prepare another person’s tax return must apply for an IRS Paid Preparer Tax Identification Number (PTIN).
Until these regulations were passed, PTINs were basically Social Security Number alternatives. Paid tax preparers were always required to sign any tax returns they prepared, providing their Social Security Numbers on the forms for identification purposes; anyone who didn’t want to provide a Social Security Number could use an IRS-issued PTIN instead, for security reasons. Upon issuance of these final regulations, the use of a PTIN will be mandatory.
New IRS Rules – Annual Fee, Exam & Continuing Education Registered Return Preparers
According to the IRS, this step was necessary because “taxpayers need and deserve tax preparers who are ethical, fully qualified, and able to provide the best possible service.” (FS-2010-1) According to the IRS, unethical or incompetent preparers are the most likely to make mistakes or file incorrect returns.
To combat this situation, the IRS will not only require PTIN registration, it will also implement a testing aspect and continuing education requirements. The hope is that the three aspects will deter unqualified preparers from applying and prevent incompetent preparers from becoming certified.
Registered Tax Preparer Rules – IRS Competency Test & Continuing Education Requirements
When these new IRS rules go into effect for all tax preparers on January 1, 2011, the only thing you need to do to get a PTIN is fill out the application and pay the $64.25 fee. However, beginning sometime around mid-2011, a testing requirement will be implemented. After that point, anyone who is not already a licensed attorney, CPA, enrolled agent, enrolled actuary, or enrolled retirement plan agent will have to take a competency exam in order to register. Anyone who signed up before the exam rolls out will have until December 31, 2013 to pass it.
At first, there will be two types of competency exams, but a third should be added shortly thereafter. Individuals will be required to take the one that matches the types of returns they prepare (individual only, individual with business income, or corporate).
After the testing requirement goes into effect, a continuing education requirement will be implemented. The IRS is still clarifying those rules, but in general, registered tax preparers will have to obtain 15 hours of continuing education credits per year in order to maintain certification.
Searchable Online Database of Registered Tax Preparers Coming
The IRS estimates that 60% of American households use a tax preparer; that means that millions of Americans will be affected by this change. It is likely that some tax preparers will opt to stop providing their services due to the stricter requirements; it is also likely that some tax preparers will not be able to qualify once the testing and continuing education components are implemented.
To help taxpayers find qualified paid tax preparers, the IRS will publish a searchable online database of all registered preparers. It is currently unknown what date this database will go live, so until then, taxpayers should continue to choose tax preparers as they would have in years past.
Learn IRS Requirements for Tax Professionals & How to Get a PTIN at irs.gov/taxpros
To learn how to get a PTIN, tax preparers should visit irs.gov/taxpros. This section of the IRS website is where updates related to the paid tax preparer regulations will be posted. The text of the final regulations is available there; for quick reference, you will find a direct link in the resources section below.
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.
Lena Gott - Lena Gott is a Certified Public Accountant who gives practical financial advice to her readers.
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