IRS New Tax Preparer Registration Plans    

The IRS is recommending that all paid preparers who prepare all or substantially all of a return be required register with the IRS and receive a Preparer Identification Number (PTIN).  It will require preparers who are not CPAs, attorneys, or enrolled agents to pass a basic competency exam.

• IRS research shows that paid preparers complete approximately 65% of all returns.
• Paid preparers will be required to register and obtain a PTIN by January 1, 2011, or they cannot prepare returns for compensation.  Applicants will be subject to the same kind of “fitness to practice” standards that Enrolled Agents are subject to now.
• If you currently have a PTIN you will keep that number when you register.
• Since eFiling will become mandatory, you must create an IRS eFile account if you don’t already have one.  Go to e-services on search box on irs.gov.  Complete instructions are in IRS Publication 3112 http://www.irs.gov/pub/irs-pdf/p4832.pdf
• Every principal in a firm must apply.  Confirmation will be mailed to the applicant’s home with instructions to sign back in to confirm registration.
• Currently there are about 1.3 Million PTINs issued. Many are not being used.
• The online registration system is on track to begin September 1, 2010.
• Non Circular 230 preparers (CTEC people in California) who register by January 1, 2011, will have three years to pass the competency exam.
• The exams are scheduled to become available in May 2011.
• After testing has begun, preparers will not be issued a PTIN without passing the competency examination.  This will not affect Enrolled Agents.
• Preparers will be required to have 15-hour per year continuing education requirement. This will not impact Enrolled Agents or CTEC licensees who already have higher CPE requirements.
• Registered Tax Preparers will be more professionalized but will be given no new powers.
• There will be a fee for registration based on the cost to IRS to provide the service.  It has not been determined yet but is estimated to be between $75 and $300 for each three-year cycle with the unofficial guestimate trending towards the low end. There will be an adjustment to Enrolled Agent renewal fees to compensate for duplication of effort.
• IRS has posted Frequently Asked Questions at http://www.irs.gov/taxpros/article/0,,id=218611,00.html
• IRS has posted the Official Report at http://www.irs.gov/pub/irs-pdf/p4832.pdf

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** Here is an update about the proposed regulations: $50 User Fee for Obtaining PTIN Proposed (NPRM REG-139343-08)

The IRS is proposing a new $50 user fee for individuals who apply for or renew a preparer tax identification number (PTIN). The $50 user fee is based on an annual PTIN renewal period and the user fee is nonrefundable regardless of whether the applicant receives a PTIN. Procedures for renewing a PTIN will be provided in other guidance, including forms and instructions.

Proposed regulations under Code Sec. 6109 require a tax return preparer that completes all or substantially all of a tax return or a claim for refund after December 31, 2010, to have a PTIN. Only attorneys, certified public accountants, enrolled agents and registered tax return preparers will be eligible to obtain a PTIN. The requirements to become a registered tax return preparer will be provided in future Circular 230 guidance.

The IRS is instituting the new user fee because federal tax compliance and suitability checks will be performed on all individuals who apply for or renew a PTIN. The IRS will further investigate individuals when the compliance or suitability check suggests that the individual may be unfit to practice before the IRS. These checks were not previously performed as a prerequisite to obtaining a PTIN because previously PTINs were issued for preparer convenience as a substitute for the preparer's Social Security number.