IRS

The IRS has issued final regulations implementing the rules requiring preparers to register for a PTIN and to pay $64.25 for the privilege. In a major win for NSA, the IRS accepted our position that all paid tax return preparers should be treated the same: all CPAs, lawyers, EAs, unenrolled preparers – everyone- will be subject to the same rules. As NSA members are aware, some have argued for a so-called CPA firm exemption from the registration rules even though other preparers such as EA firms, law firms and other firms, were providing identical tax return preparation services offered by CPA firms. Importantly, the rules will require all preparers to register, even those preparers in other countries to whom a CPA firm or any other tax return preparation firms outsources the actual work.

In addition to rejecting the CPA firm exemption, the IRS accepted a number of NSA recommendations, including requiring those who prepare returns “for free” to obtain a PTIN if they do so in conjunction with another commercial service such as an automobile test drive, a new hairdo, or some other activity.

NSA members should know that the proposed amendments to Circular 230, which amend the rules for continuing education, are still in proposed form. There will be a hearing on these amendments on October 8 and NSA EVP, John Ams, will testify that, among other things, the rules for qualifying “each educational program” must be changed to accommodate any last minute changes to tax law.

It is still unclear how the IRS will treat continuing education in light of the upcoming hearing, however the regulations indicate that a PTIN “registration year” will run from the date of registration to the same date the following year. It is this period during with the required 15 hours of education must be taken. Given the uncertainty – has the program received prior approval, is the instructor approved, etc. – NSA strongly recommends at this time that member register for a PTIN as late in 2010 as possible, but prior to January 1, 2011. This will eliminate the possibility that CPE taken in November and early December, while relevant, will not count for PTIN renewal purposes. Perhaps the final rules for Circular 230 will give some leeway, but why take a chance?

IRS Website Webinar Info Link for Info on IRS Webinar “Demonstration of the IRS Tax Professional PTIN Sign-Up System”

PTIN Frequently Asked Questions

• Who needs a Preparer Tax Identification Number (PTIN)? 
  
  

  - All tax return preparers who are compensated for preparing, or assisting in the preparation of, all or substantially all of a U.S. federal tax return or claim for refund must obtain a PTIN.

• I already have a PTIN. Do I need to take any action this year? 
  
  

  - Yes. All federal tax return preparers, even those who already have a PTIN, will need to register in the new system now available. All preparers will need to be registered on the new system and have a PTIN prior to filing any return after December 31, 2010. As long as the IRS can validate the ownership of the existing PTIN, the same number will be reassigned once the appropriate information is provided and the user fee paid.

• Can multiple individuals or one office share one PTIN? 
  
  

  - No, a PTIN is an individual preparer’s number. Each preparer must obtain his or her own PTIN.

• Does the PTIN requirement apply to individuals who only prepare payroll or other non-1040 series returns? 
  
  

  - Yes. All paid tax return preparers are required to obtain a PTIN.

• What is the testing proposal? 
  
  

  - The IRS has proposed that individuals who are not an attorney, CPA or EA will have to pass a competency test to officially become a Registered Tax Return Preparer. The IRS expects testing to begin in mid-2011.

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

  - Enrolled actuaries and enrolled retirement agents will be exempt if they only prepare returns within their limited practice areas.

  - More guidance on testing, the testing fee, and any other exempt individuals will be available in spring 2011.

• Are ACAT Credential holders exempt from testing? 
  
  

  - No. ACAT credential holders who are paid to prepare all or substantially all of a federal tax return will need to pass the competency exam.

• Enrolled Agents currently pay $125 for enrollment and renewal. Attorneys and CPAs pay similar fees to their oversight organizations. Will the fee for obtaining a PTIN be applicable to EAs, CPAs, and Attorneys? 
  
  

  - Yes. All paid tax return preparers will have to pay a fee to obtain and renew their PTINs. This fee is in addition to any fee that paid tax return preparers must pay for any other certifications or licenses they hold.

  - The IRS is recalculating the $125 enrolled agent renewal fee. A reduced fee amount will be announced in the future.

Link to IRS PTIN information and signup.