Tax Preparers Competency

by Darrin Mish, Tampa Tax Attorney
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The new requirement for tax preparers to register themselves is underway involving, among other things, passing a competency test. Since the beginning of this year, already more than 4,800 tax preparers have taken the mandatory Return Tax Preparers Test (RTPT). But there are another 340,000 tax preparers who have not done so. As usual, it is easy to procrastinate. Hence, the IRS is urging the remaining tax preparers who have not taken the test to do it as soon as possible to avoid rushing with some of the last-minute test takers. Furthermore, if you take your test early, you would have enough time to re-sit the test before the deadline if you fail to make the grade.

All those who receive any form of remuneration for helping other people prepare their tax returns must be registered as tax preparers. But attorneys, CPAs and enrolled agents are exempted because these have their own governing professional bodies with competency tests. The RTPT can be taken at 260 centers nationwide. You can set your time, date and location for your test at the IRS website, www.irs.gov/ptin where your online PTIN account is hosted.

This entire exercise to regularize the tax preparer industry began about 3 years ago when IRS Commissioner Doug Shulman conducted a 6-month review of tax preparers’ conduct and competency. During the review, a series of public hearings were held with the tax preparation community, consumer advocates, oversight groups and taxpayers. At the end of the exercise, the Return Preparer Review forwarded many recommendations aimed at regulating certain aspects of the tax preparer industry to increase tax compliance and improve service to taxpayers.

As a result, the IRS is taking the following steps:

1. Registering all paid tax preparers

All paid tax preparers have to be formally registered and will be issued a Preparer Tax Identification Number (PTIN) upon doing so. The registration is valid for a year and has to be renewed annually. So far, 850,000 tax preparers have undergone the registration exercise.

2. Ensuring competency

To ensure competency in knowledge of tax matters, the IRS has made it mandatory for certain tax preparers to take the RTPT that comprises 120 questions if they want to continue doing business. The RTPT was launched in November last year. In addition, the IRS also requires certain tax preparers to undertake 15 hours of continuing education courses every year. This includes 10 hours in federal tax law, three hours in federal tax law changes and two hours in ethics. For more information on the continuous education requirements, visit www.irs.gov/taxpros/ce.

3. Enhancing ethics and tax compliance

The IRS is working to instill greater professionalism in all tax preparers, similar to that required of CPA’s, attorneys and enrolled agents. In line with this, all paid preparers have to be subject to a tax compliance check and are subject to the standards for practice outlined in Treasury Department Circular 230. Only upon passing the RTPT and compliance check will a tax preparer be recognized as a Registered Tax Return Preparer. Currently more than 4,800 tax preparers have earned their Registered Tax Return Preparer status. Starting from 2014, only Registered Tax Return Preparers, Enrolled Agents, CPAs, and attorneys will be authorized to prepare individual income tax returns for remuneration.

 

Written by:

Darrin Mish, Tampa Tax Attorney
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