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William Perez

Tax Preparers to Become Registered by the IRS

By January 5, 2010

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Everyone who prepares a tax return for a fee will eventually need to register by the Internal Revenue Service. Tax attorneys, certified public accountants, and enrolled agents are already registered with the IRS and are subject to testing and continuing education requirements. The IRS will require than other tax preparers also register, pass a competency test, and meet continuing education requirements. The agency plans to start implementing this plan in 2011. In their news release, the IRS outlines the basic requirements:

  • "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). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
  • "Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
  • "Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.
  • "Extending the ethical rules found in Treasury Department Circular 230 -- which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS -- to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct."

The ethical conduct rules I find to be the most interesting of all the requirements. Attorneys, CPAs, and enrolled agents already are subject to rules regarding ethical behavior including, among other things, not charging a fee based on a percentage of a refund and following strict rules regarding how client data is protected and utilized.

In their more in-depth 55-page report, the IRS outlines that tax return preparers will need to have at least 15 hours of continuing professional education in tax-related topics, and that the agency plans to develop three tests covering basic Form 1040 topics, more advanced 1040 topics, and topics related to business tax returns. By contrast, enrolled agents are required to complete roughly 24 hours of continuing education per year (72 hours total in a 3-year cycle); attorneys and CPAs complete continuing education as mandated by their state bar or board of accountancy.

What other tax bloggers are saying:

  • "Yes, I know we're treating a symptom here -- incompetent and/or criminal tax preparers -- rather than the real illness -- a tax code and its implementation that is so complicated that most of us need outside help to meet our tax-filing obligations." Don't Mess With Taxes
  • "I am disappointed that - (1) attorneys and CPAs who prepare 1040s are not required to take a competency test or to satisfy the mandatory continuing education in taxation requirements, and (2) there is no mention of a 'grandfathering' exemption from the required competency test for non-initialed preparers." Wandering Tax Pro

March 7, 2010 at 9:35 am
(1) enrolled agent exam says:

It is about time. Estimates are that there are more than 1.2 million paid tax preparers in the United States. At present a paid preparer is not required to demonstrate competency or understanding of the tax rules. Those able to fog a mirror can prepare a tax return for money. Now here comes a bombshell, according to a report by the General Accounting Office of the United States millions of taxpayers using paid preparers likely overpaid taxes due to preparer error.

March 7, 2010 at 9:45 am
(2) enrolled agent exam says:

Because they are required to take an exam and annual CE, I think many of those affected by these new regulations will finally take the step to become enrolled agents. Why not passing the enrolled agent exam can open up more opportunities for them. The practice of the new category of preparers will be limited to preparing tax returns for compensation and representing taxpayers in an examination only on a return they prepared.

March 17, 2010 at 3:26 pm
(3) George says:

LPAs are not mentioned in any of the the discussions.
do they have to take the test?

December 26, 2012 at 5:15 pm
(4) Liz says:

Do you know how many offices I was a temporary or seasonal tax preparer, where the CPA or Attorney never even handled or looked at the return, they just SIGNED the stack??

One tax attorney admitted not even being current on the new laws, that he has an assistant for that!!!!

Make them ALL prove competency!

June 28, 2013 at 11:52 pm
(5) David says:

I see comments on how paid preparers do not have to be certified or have CE. What world are you in? I have been a registered tax preparer in the state California for over 20 yrs. I had to have 60+ hrs to qualify. I have had to have 20 hrs per year to continue doing taxes (16hrs fed and 4hrs state rules) and now 2hrs of ethics. Plus we have to carry a bond. And I have to prove competency to the feds???? But then in Mich. I know those who prepare taxes with no formal training…including insurance agents…

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