Proposed new requirements - federal tax return preparers

[Famspear]

The Internal Revenue Service is working on proposed new requirements for federal tax return preparers.

See

http://www.irs.gov/taxpros/article/0,,id=210909,00.html

As I have noted in another thread, it will soon be harder for some people to break into the federal tax return preparation business, or even to continue in that business. The U.S. Treasury is now working on a regulatory system whereby anyone who is not a CPA, an attorney, or an enrolled agent will have to pass an IRS examination in order to continue in the business of federal tax return preparation. This will be a national system. There will also be continuing education requirements (the education requirements also will not apply to CPAs, attorneys and enrolled agents, as they already have continuing education systems).

And I believe the definition of "practice before the Internal Revenue Service" will be changed to include tax return preparation. Up to now, the term has not included tax return preparation -- just things like representing taxpayers in IRS examinations, IRS collections actions, and so on.

The IRS will require that everyone who wants to continue in the federal tax prep business (or to enter the field) will have to obtain a PTIN, a practitioner tax ID number. Those who already have a PTIN (myself included) will have to re-register with the IRS (which can be done on the IRS web site). At some point, IRS will no longer allow practitioners to use the social security number as a practitioner number.

The new rules will reportedly require that all federal tax return preparers register and obtain a PTIN (and pass the IRS exam if the practitioner isn't a CPA, attorney, or enrolled agent) -- even preparers who are not signing the tax return.

Scenario: In the typical CPA firm of any substantial size, you as the staff accountant prepare the return and your superviser reviews it, writes a couple of points. You clear the points, he or she finalizes the return and signs it. Even though you're not the SIGNING preparer, you will still be "a" preparer under the new rules, and you'll have to go through the same IRS regulatory hoops as everyone else.

The details are still being worked out by the IRS. I suspect, however, that the IRS examination requirements are going to make it more difficult for Eddie's Corner Tax Service and School of Bartending to continue in the business.

[Famspear]

From the IRS web site, regarding the REGISTRATION requirement:

Beginning in early September 2010, return preparers may begin signing up for a PTIN. All tax return preparers, including those tax return preparers who are attorneys, certified public accountants, and enrolled agents, must have PTINs if they prepare tax returns after December 31, 2010......

Regarding the COMPETENCY TESTING requirement:

Beginning in mid-2011, tax return preparers must pass a competency test to officially become a registered tax return preparer.

Tax return preparers who have PTINs before testing becomes available will have until Dec. 31, 2013, to pass the competency test. After testing becomes available, new tax return preparers will be required to pass the competency test before they can obtain a PTIN.

Attorneys, certified public accountants, and enrolled agents will be exempt from the competency test requirement. Enrolled actuaries and enrolled retirement plan agents will be exempt from the competency test requirement if they only prepare returns within the limited practice areas of these groups. More guidance on testing will be available in spring 2011, including the amount of the testing fee.

Regarding the CONTINUING EDUCATION requirement:

A new continuing education requirement of 15 hours per year will also be implemented in the future. The beginning date has not been determined.

Courses will need to include 3 hours of federal tax law updates, 2 hours of ethics, and 10 hours of other federal tax law.

This will not apply to attorneys, certified public accountants, enrolled agents, enrolled actuaries, or enrolled retirement plan agents due to their existing education requirements. Continuing education credit opportunities will be available from a variety of approved sources.....

http://www.irs.gov/taxpros/article/0,,id=221009,00.html

[Famspear]

Some additional wrinkles:

How will the new regulations affect registered or licensed public accountants? Would they have to test? (revised 4/12/10)

In many states, a registered or licensed public accountant (LPA) has the same rights and privileges as a certified public accountant. Thus, an LPA in those states is eligible to practice before the IRS by virtue of their public accountant’s license and these individuals will not be required to pass the IRS' return preparer examination or satisfy the CPE requirements for tax return preparers.

The following is a non-exclusive list of states where a LPA has the same rights and privileges as a CPA: Alabama, Alaska, Arkansas, California, Colorado (Registered Public Accountants only), Connecticut, Hawaii, Idaho, Maine, Montana, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, and West Virginia.

LPAs in the following states do not have the same rights and privileges as a certified public accountant and, therefore, will be required to pass the IRS' return preparer examination and satisfy the CPE requirements for tax return preparers to prepare any federal tax return for compensation (unless the LPA is an attorney or enrolled agent): Delaware, Illinois, Iowa, Kansas, Michigan, Oregon, and South Carolina
LPAs in other states should review the laws of the state in which they are licensed to determine whether they have the same rights and privileges as a certified public accountant.

In Minnesota, we have Registered Public Accountants. These individuals are governed by the Minnesota Board of Accountancy, must register with the Board, pay a fee and have continuing education requirements and ethics requirements. Will they have to test? (posted 1/22/10)

In general, a registered (or licensed) public accountant may practice before the IRS if the registered (or licensed) public accountant has the same rights and privileges as a certified public accountant under state law. Although the IRS has reviewed the laws of 29 states to determine if the registered (or licensed) public accountants in those states have the same rights and privileges as a CPA, Minnesota is not one of those 29 states. Accordingly, the registered public accountants in Minnesota should review their own state laws to determine whether they have the same rights and privileges as a CPA. until the Office of Professional Responsibility has an opportunity to formally consider whether Minnesota’s registered public accountants are qualified to practice as CPAs.

http://www.irs.gov/taxpros/article/0,,id=218611,00.html

And....

Will preparers who are registered by the states of California or Oregon (California Tax Return Preparers and Oregon Licensed Tax Preparers/Consultants) be exempt from testing and continuing education requirements? (posted 1/22/10)

Only attorneys, certified public accountants and enrolled agents will be exempt from testing and continuing education requirements.

[Famspear]

And....

Will the recommendations apply to individuals who only prepare payroll or other non-1040 series returns? (revised 7/22/10)

All paid tax return preparers will be required to obtain a preparer tax identification number (PTIN). If the preparer is not an attorney, certified public accountant, or enrolled agent, the preparer will need to satisfy the competency test and continuing education requirements. The initial two tests will be for individuals who prepare Form 1040 series returns. Additional guidance for individuals who do not prepare any Form 1040 series returns and who are not an attorney, CPA, or enrolled agent will be provided when testing is implemented.

Individuals who are enrolled retirement plan agents or enrolled actuaries will be exempt from the competency test requirement if they only prepare returns within the limited practice areas of these groups.

[Randall]

How are employee-preparers affected? Particularly treasurers/controllers that prepare the 1120?

[Famspear]

How are employee-preparers affected? Particularly treasurers/controllers that prepare the 1120?

I believe this is the answer, from the IRS web site:

question:

If an employee of a business prepares the business’ tax returns as part of their job responsibilities, will the recommendations affect them? (posted 2/2/10)

answer:

No. An employee who prepares his employer’s returns is not required to sign as a paid preparer. Accordingly, unless the employee prepares other federal tax returns for compensation, he or she will not be required to register and obtain a PTIN.

http://www.irs.gov/taxpros/article/0,,id=218611,00.html

[Famspear]

Tuesday, Sept 28 -- The Internal Revenue Service went online with its "PTIN" registration for practitioners. For fun, I tried to register online. Apparently that was a mistake -- ie, trying to do it on the very first day, rather than waiting for them to iron out the bugs.

It's a four-step process, and I got through step 3 (paying the $64.25 fee by credit card). As soon as I did that, the system knocked me off. I received an email confirming that the IRS took my money (of course), but I have no confirmation that my PTIN has been issued (or, rather, re-issued, as I already had one).

No one answers the "help" line number provided. I imagine they're just swamped with calls today. The process, which the web site says takes only 15 minutes, obviously isn't working.

Supposedly every practitioner is going to have to register by December 31, 2010. It will be interesting to see whether the IRS can get this system operating properly so that the deadline can be met.

[jcolvin2]

Tuesday, Sept 28 -- The Internal Revenue Service went online with its "PTIN" registration for practitioners. For fun, I tried to register online. Apparently that was a mistake -- ie, trying to do it on the very first day, rather than waiting for them to iron out the bugs.

It's a four-step process, and I got through step 3 (paying the $64.25 fee by credit card). As soon as I did that, the system knocked me off. I received an email confirming that the IRS took my money (of course), but I have no confirmation that my PTIN has been issued (or, rather, re-issued, as I already had one).

No one answers the "help" line number provided. I imagine they're just swamped with calls today. The process, which the web site says takes only 15 minutes, obviously isn't working.

Supposedly every practitioner is going to have to register by December 31, 2010. It will be interesting to see whether the IRS can get this system operating properly so that the deadline can be met.

I obtained my PTIN today. The help line was swamped, it took me 45 minutes to get through. I don't think you will have much trouble getting back online to complete the application, you made it through the hardest part. The only trouble I had was with by CAF number. The system was set up to only accept eight digit CAF numbers. My CAF number (like many others) is nine digits long. For $64.25/application, you would think that all of the bugs would have been worked out.

[Famspear]

Tuesday, Sept 28 -- The Internal Revenue Service went online with its "PTIN" registration for practitioners. For fun, I tried to register online. Apparently that was a mistake -- ie, trying to do it on the very first day, rather than waiting for them to iron out the bugs.

It's a four-step process, and I got through step 3 (paying the $64.25 fee by credit card). As soon as I did that, the system knocked me off. I received an email confirming that the IRS took my money (of course), but I have no confirmation that my PTIN has been issued (or, rather, re-issued, as I already had one).

No one answers the "help" line number provided. I imagine they're just swamped with calls today. The process, which the web site says takes only 15 minutes, obviously isn't working.

Supposedly every practitioner is going to have to register by December 31, 2010. It will be interesting to see whether the IRS can get this system operating properly so that the deadline can be met.

I obtained my PTIN today. The help line was swamped, it took me 45 minutes to get through. I don't think you will have much trouble getting back online to complete the application, you made it through the hardest part. The only trouble I had was with by CAF number. The system was set up to only accept eight digit CAF numbers. My CAF number (like many others) is nine digits long. For $64.25/application, you would think that all of the bugs would have been worked out.

Yes, I also noticed the problem with the CAF number when I registered. The "field" on the web site for entering the CAF number has been programmed incorrectly; it does not allow for enough room to input the number. My CAF number is in the format of 4444-44444R. I had assumed that all CAF numbers are in this format (four digits, then a dash, then five digits and one letter). Even leaving out the dash and the letter, the system simply won't accept a CAF number.

I tried calling the help line this morning (Wednesday, Sept. 29), and a recording says (essentially) that they're swamped with calls, and to try again later.

This definitely cannot be done in 15 minutes (which is what they advertised).

Another problem with the system is that it was very slow to respond each time I clicked the "next" button.

Obviously, this system should have been checked and tested more thoroughly before they put it up on line.

[Famspear]

Now, the problem with the CAF field appears to have been corrected. The system still won't let me finish my application. I get to a certain point in the process, and I get an on-screen message saying that they are experiencing difficulties, and that I should hit "cancel". So, they're charging my credit card account but I still can't complete the registration process.

The help line, phone 877-613-7846, is also useless. Each time I've called today, the line answers with a recorded voice suggesting that I try to call back later.

[Randall]

I've apparently forgotten my user name and do not see anywhere on the web site to retrieve/reset it. Plenty of places to reset the password, but you need the user name.
Now what?

[Joe Dirt]

I renewed my PTIN today. The system is working much better than what those of the brave here have encountered in signing up early... The only problem was with the zip code field in the tax return address. Despite the instruction to enter your tax return address EXACTLY as it appears on the return which in my case was using the Zip plus four for my postal code, I was informed by the site tech support that the system only recognizes five digit zip codes.

My wait to talk to a technician was about 15 minutes which was ok... the support rep was very helpful and competent and stayed on the phone with me to be sure that my changes worked.

$64.25 is kind of pricey to "validate" a number that I've been using for years and truthfully I'd have much more enjoyed a steak dinner, but if this program cleans out some of the crap in this business, it is money well spent.

[lled]

I like reading the information here the concepts are useful and helpful.

[wserra]

Making the case for prophylactic spammer control.