The IRS now requires every person who accepts money in exchange for tax preparation services to have a valid Preparer Tax Identification Number (or PTIN). This requirement has been in effect since January 1, 2011. To date, all tax preparers need to do to register is fill out the appropriate forms and pay the $64.25 annual registration fee.
Beginning any day now, however, every prospective preparer (who is not specifically exempted) will also have to pass a proficiency exam in order to obtain a PTIN. At irs.gov/taxpros, the IRS has indicated that the competency exam will be phased in sometime in mid-2011. With the middle of 2011 approaching, paid tax preparers should understand the changing requirements.
IRS Competency Test to Accompany PTIN Application Soon
Until the competency test is available, prospective preparers may obtain tax preparer ID numbers by simply filling out an application and paying the registration fee. Once the test goes live, a preparer must display a certain level of competency in order to receive a PTIN. Those who register before the competency exam is available have until December 31, 2013 to pass it. However, not passing the exam by that date will result in deactivation and removal from the online database of registered preparers.
Until the IRS officially rolls out the testing component of the PTIN process, no one knows exactly what to expect. However, from IR-2010-099, FS-2010-1, and TD 9503, we know the following:
- The competency exam will be available an unlimited number of times, but a fee must be paid before each sitting (note: exact fee amount not yet set). Length of test and vendor are currently unknown.
- Exams will be administered in person.
- Exam prep courses will not be available from the IRS; the IRS will only indicate which forms and schedules to study. Study guides will likely be offered by third parties, but they will need several rounds of the test to be administered before a candidate can depend on the review course for a passing grade.
IRS Registered Tax Return Preparer Continuing Education Requirements
At an undisclosed date in the future, the IRS will also clarify continuing education requirements for paid preparers. At that time, all registered tax preparers will have to fulfill fifteen hours of continuing education every year in order to continue charging a fee to prepare federal tax returns.
Tax preparers should note that there will be exceptions to the examination and continuing education requirements. The IRS has indicated in New Tax Return Preparer Regulations – Overview that licensed attorneys, CPAs, supervised preparers, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and those who don’t prepare Form 1040 series returns will not have to test. Exemption from continuing education requirements will likely extend to the same individuals, but that will not be known for sure until the IRS clarifies those rules.
IRS Requirements for Tax Professionals
The IRS has made it clear that it will periodically revisit the exemptions for certain professionals by analyzing the accuracy of returns prepared by individuals in the exempted groups. The idea is that exempted individuals will demonstrate a level of proficiency required to continue the exemption.
As more guidance is available, interested individuals can get updates from the Tax Professionals portal of the IRS website.
Sources:
- 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.
- New Tax Return Preparer Regulations – Overview. Retrieved from irs.gov/taxpros on May 27, 2011.
- 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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