It has been months, and in
some respects, years in the planning, but the IRS has finally issued a report
outlining its recommendations with regard to tax preparer regulation. During the summer months, IRS Commissioner
Douglas Shulman help panel discussions with tax return preparers, federal and
state officials, consumer advocacy groups, and professional associations such
as NATP to gather input on how best to ensure competency among tax return
preparers. The result was a
comprehensive report outlining the steps needed to accomplish that goal.
Based on the results of the Return Preparer Review, the IRS recommends a number of steps that it plans to implement for future filing seasons, including:
·
Requiring all paid tax return preparers who
must sign a federal tax return to register with the IRS and obtain a preparer
tax identification number (PTIN). The
IRS intends to develop an online registration system for paid return preparers
and issue PTINs to preparers who do not currently have one. The IRS also intends for the registration
process to apply to those paid preparers who already have a PTIN. These individuals will have their current
PTIN reissued to them when they register.
These preparers will be subject to a limited tax compliance check to
ensure that they have filed federal personal, employments, and business tax
returns, and that the tax due on those returns has been paid. Registration renewals and user fee payments
would be required every three years. Registration
and PTIN requirements would not apply to volunteer or other uncompensated
preparers.
·
Requiring competency tests for all paid tax
return preparers. Competency testing
will not apply to attorneys, CPAs, and enrolled agents who are active and in
good standing with their respective licensing agencies. To avoid business interruption for exiting
preparers and clients, a transition rule would give existing preparers
approximately three years to meet the competency testing requirement. There will be two levels of competency
examinations for (1) wage and non-business Form 1040 series, and (2) wage and
small business Form 1040 series. The IRS
plans to monitor the testing process during the implementation period to study
whether additional tests are necessary and feasible. The IRS plans to add a third test on business
tax preparation after the initial implementation phase is completed. The IRS plans to permit preparers who test
during the initial three-year implementation period to sit for the examination
as often as it is offered until they pass, provided the applicable fee is paid
for each attempt. The IRS does not
intend to “grandfather” any tax return preparer from the testing requirement
based on return preparation experience.
Once testing is available, the IRS plans to require unregistered
individuals who want to become preparers to pass the competency test prior to
registration and issuance of a PTIN.
·
Requiring ongoing continuing professional
education for all paid tax return preparers.
Attorneys, CPAs, enrolled agents, and other who are already subject
to continuing education requirements are exempt. Paid preparers who are not attorneys, CPAs,
enrolled agents, enrolled actuaries, or enrolled retirement plan agents would
be required to complete 15 hours of continuing education annually. The 15 hours must include 3 hours of federal
tax law updates, 2 hours of tax ethics, and 10 hours of other federal tax law
topics. The IRS intends to have paid
preparers self-certify completion of continuing education requirements during
registratio0n renewal. The IRS plans to
conduct periodic checks to ensure compliance with the requirements. While attorneys, CPAs, enrolled agents,
enrolled actuaries, and enrolled retirement plan agents are not subject to IRS
continuing education requirements or self-certification during the registration
renewal process, they generally must complete continuing education to retain
their professional credentials. If data
is collected in the future that identifies a need for educational requirements
for these individuals, the IRS will consider expanding the continuing education
requirements to them.
·
Extending the ethical rules found in Treasury
Department Circular 230 to all paid preparers.
Currently Circular 230 only applies to attorneys, CPAs, and enrolled
agents who practice before the IRS. This
expansion would allow the IRS to suspend or otherwise discipline tax return
preparers who engage in unethical or disreputable conduct.
Although the report
provides details on what the IRS intends to implement, it leaves many
unanswered questions. For instance,
there has been no mention in the report of testing on estate, gift, or trust
tax law. None of the recommendations are
effective for the immediate filing season.
Proposed and final regulations are necessary for implementation of many
of these recommendations. NATP will
continue to monitor these developments and will keep you informed as more
information is made available. The full
report is on the IRS website at www.irs.gov/taxpros/article/0,,id=210909,00.html.