IRS Releases Proposed Regulations Related to Fees for Preparer Tax Identification Numbers
WASHINGTON — The Internal Revenue Service today, July 22, 2010, released proposed regulations that would establish a fee for individuals who apply for a preparer tax identification number (PTIN). Proposed regulations that were issued in March would require certain tax return preparers to obtain a PTIN. The IRS is working to finalize those proposed regulations, which are the first of a series of steps planned to increase oversight of federal tax return preparation.
The proposed regulations (REG-139343-08) would establish a fee of $50, payable to the IRS, to cover technology costs, as well as compliance and outreach efforts associated with the new PTIN program. The proposed regulations would also provide for an additional fee (expected to be substantially lower than $50) to be charged by the third-party vendor chosen to operate the new online system. That fee amount is expected to be announced soon, as well as additional details about the launch of a new online application system. These fees could change in future years as program costs are reevaluated.
Agencies are directed by the Office of Management and Budget (OMB) to charge user fees to recover the cost of services that convey special benefits beyond those available to the general public, such as the authority to prepare federal tax returns for compensation.
Tax professionals and other interested parties have until Aug. 23, 2010, to submit comments regarding the proposed regulations. The official publication date of these proposed regulations is July 23.
In January, IRS Commissioner Doug Shulman announced the results of a comprehensive six-month study of the tax return preparer industry, which proposed new registration, testing, and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax return preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.
How to Learn More
The IRS recently broadcast the topic “New Requirements for Tax Return Preparers – Learn the Who, What, When and How” on the webinar IRS Live, an educational program for tax professionals. View the archive on IRS.gov.
Tax professionals can also learn more by attending one of six tax forums this summer around the country hosted by the IRS. The IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues.
Source: National Society of Accountants and IRS IR-2010-086
Registration and PTIN Required
The IRS released its long-awaited Tax Preparer Regulation Proposal. The proposal does not provide a time line for implementation but notes that the proposal’s recommendations can be implemented through regulations. Consequently, we can expect to see more substance about what will be required in the near future.
The proposal specifies the following with respect to registration:
- IRS will require all individuals who are required to sign a federal tax return as a paid tax return preparer to register and obtain a preparer tax identification number. The IRS may charge a reasonable, nonrefundable fee to register as a tax return preparer. The preparer tax identification number will be the exclusive number used to identify any tax return preparer submitting returns to the IRS.
- The IRS will study the impact and necessity of expanding this registration requirement to nonsigning tax return preparers in the future.
- The IRS will make tax return preparer registration effective for three-year periods and require tax return preparers to renew their registration every three years.
NSA has learned that the IRS intends the registration requirement to be in place next year at this time, and preparers will need a PTIN to sign returns reporting income for 2010. The IRS proposal is unclear as to whether a preparer who already has a PTIN will be required to re-register for this purpose.
Minimum Competency Testing to Be Required for All Preparers Except Those Covered by Circular 230
The IRS is proposing to establish minimum competency testing for tax return preparers who are not attorneys, certified public accountants, or enrolled agents. The IRS is not proposing a competency testing program for attorneys, certified public accountants, or enrolled agents currently, but the IRS will consider expanding testing to those individuals if data is collected in the future that identifies a need for this testing.
Initially, two examinations will be offered for tax return preparers who are not attorneys, certified public accountants, or enrolled agents. The first test will cover wage and non-business income Form 1040 series returns. The second test will cover wage and small business income Form 1040 series returns.
It is important to note that the IRS currently has no idea how it will test preparers, who will do the testing, and what database will be used. Consequently, there is no indication as to when this proposal can be implemented.
The IRS will not “grandfather” any tax return preparer from the testing requirement based on return preparation experience. This means that preparers who have taken and passed the examination offered in Oregon, or who pass the examination expected to be offered in the future in Maryland, will also have to take the proposed federal examination.
The IRS intends that the examinations offered in Oregon, Maryland and by third parties such as the Accreditation Council for Accountancy and Taxation will continue to have a useful role in the tax preparation industry by identifying preparers who are experienced and have taken difficult examinations demonstrating expertise in more complex areas of the tax law. In fact, IRS officials have reviewed the ACAT examinations and found them too difficult for the minimum competency testing that the IRS has in mind.
The IRS will place all signing and nonsigning tax return preparers under Treasury Department Circular 230. Thus, all such preparers will be subject to the same ethics rules currently applicable to CPAs, attorneys and enrolled agents. The authority granted to those individuals who do not have professional licenses and who are not enrolled agents, enrolled actuaries or enrolled retirement plan agents will be limited to preparing tax returns and representing their clients as currently permitted during an examination of any return prepared by the tax return preparer.
The IRS will also develop a consumer awareness campaign and develop a searchable database of registered tax return preparers.
Click here to view a copy of the Tax Preparer Regulation Proposal
Source: National Society of Accountants
