Over the past few months the IRS has been reminding paid preparers that they must renew or apply for their PTIN's by January 1, 2012. If you are a paid preparer now is the time to ensure you are in compliance with the IRS before you complete your first return.
New regulations for paid preparers are rolling out in phases:
Phase 1: PTINs for Everyone
First Time PTIN Applicants
Beginning January 1, 2012 if you are a paid preparer you must have a Preparer Tax Identification Number before preparing returns. It will costs $64.25 per year for a first time PTIN Application and you can sign up for your PTIN online or by paper application. View this checklist before you start.
Renewal Applicants
To Renew online follow these easy steps:
1. Access your account online – Log in now if you have an online PTIN account
2. Renew your PTIN – Complete the online renewal application, verify personal information, and answer a few questions. You can view a checklist of what you need before you start.
3. Pay your fee – The renewal fee is $63 and you can pay by credit card or debit card.
View your next steps- There maybe additional steps that include testing and continuing education requirements.
The good news is that the IRS states it takes about 15 minutes to sign up or renew online to receive your PTIN.
Phase 2: Additional requirments for some preparers
Some Preparers have additional requirements in the future.
Attorney's, Certified Public Accountants, and Enrolled Agents who are active and in good standing with their licensing have no additional requirements other than to renew their PTIN annually.
Supervised Preparer* and Non- 1040 Preparers** will need to renew their PTIN annually.
*Supervised Preparers are those who do not sign returns and who are employed by attorney, CPA or EA fims and are supervised by an attorney, CPA, or EA.
**Non-1040 preparers are those who do not prepare any Form 1040 series returns. Note: From 1040-PR and 1040-SS are not considered Form 1040 series returns for this purpose.
All other preparers will need to:
1. Renew PTIN annually
2. Pass a compentency test
3. Take continuing education courses annually
Competency testing has already begun and those who already have a PTIN will have until the end of 2013 to take and pass the exam.
The continuing education requirement is expected to start in 2012.
Please note that the IRS is also considering that certain tax return preparers undergo a background check as part of the PTIN requirments. Preparers will be contacted if they are required to undergo a background check in the future and any updates on background check requirements will be posted on the IRS website.
Please view this summary of the return preparer requirements.
Tax season is literally weeks away and now is the time to ensure you follow the IRS rules and regulations regarding PTIN processing.
There was recently a notice on the IRS website letting preparers know that the PTIN e-services system would be offline until October 19th. Preparers will now notice that the site is live again and lists the steps and requirements for PTIN renewal. Keep in mind that ALL paid preparers must renew their PTIN before 1/1/12 in order to be eligible for the upcoming filing season. In addition, remember that many preparers are subject to newly instituted competency testing requirements and must take continuing education courses on a yearly basis. The steps for PTIN registration as detailed on the IRS site are as follows:
1. Access your account: If you already have an online PTIN account (meaning you registered for and obtained your PTIN ONLINE last year) you can log in using your regular account. However, if you received your PTIN via snail mail, courtesy of form W-12, keep your eye out for letter 4762 that will contain information on how to convert to an online PTIN account.
2. Renew your account: Once you have logged in to your online account you will be asked to answer a few questions and verify your information. Make sure that you have everything you need in order to complete this step easily. Review this checklist to make sure all of your ducks are in a row.
3. Pay the Fee: Fear not, the IRS didn’t forget about the PTIN fee. You can pay your $63 renewal fee via credit card or direct debit.
4. View Next Steps: Finally the IRS e-services system will describe the next steps for your unique situation. This could include testing requirements and continued education. Make sure to complete these in order to stay compliant. Make sure you complete this EVERY calendar year.
TaxSlayer Pro will continue to keep you updated to changes and developments regarding this new system. While it will certainly be a growing process it should help standardize the industry and the reputation of tax preparers across the country. Look for future communication regarding this subject in your message center within TaxSlayer Pro.
Long held as one of the most controversial topics between IRS compliance sectors and the tax prep industry, the EITC checklist is facing the possibility of new requirements. In an effort to stem fraud and increase compliance, the IRS has proposed new regulations that would require tax prepares to file a due diligence checklist with any return claiming the Earned Income Tax Credit.
Originally instituted by Congress more than ten years ago, the due diligence requirements aimed to aid preparers in error checking and compliance when dealing with those returns claiming the earned income tax credit. Furthermore, the checklist (Form 8867) aimed to help maintain due diligence and ensure that all bases were covered when preparing these types of returns. Preparers have been required to keep these on file should the IRS wish to review them. Not only has this caused more paperwork and storage costs for preparers but in many cases it has proved to be quite a hassle.
While this new requirement may seem unjust or unwarranted for many in the industry, it is, in my mind, a good move for the IRS. Before you cast stones, hear me out on this. Assuming this regulation passes, the EITC checklist within the TaxSlayer Pro software would in all likelihood be efiled with the remainder of the return, therefore removing the record keeping burden from you the preparer. This seamless process would cause much less of a burden and put more of the responsibility of the process back where it belongs, on the tax payer.
For more information stay tuned to irs.gov. Comments on the proposed regulation are welcome until November 10th and a public hearing will be held on November 7th.
The IRS has recently released the finalized details regarding return preparer testing and the related requirements. Testing is scheduled to begin in October of 2011. This test is the latest stage of efforts by the IRS to enhance the oversight of the tax industry. The IRS says that the test will consist of 120 questions in either multiple choice or true false format. The IRS estimates that the test will take two to three hours to complete. Questions will be weighted in relationship to the final score. Prometric, the testing center long associated with the EA Exam and other IRS competency tests, helped develop and will administer the test at any of its over 260 locations nationwide. You can view a list of these locations here. Test takers will know immediately whether they have passed the test and feedback as to problem areas will be given to those who did not pass.
Before we delve deeper in to the details of the test let’s first determine who must take it. Keep in mind that not everyone who prepares tax returns is subject to the testing requirement. Many return preparers such as EA’s and CPA’s have already satisfied the necessary steps as part of their respective licensing. Take a look at the chart below to help explain this and determine whether you are subject to testing.
Category
PTIN
Tax Compliance Check
Background Check
Competency Test
Continuing Education
Attorneys
Yes
Yes
No
No
No
CPAs
Yes
Yes
No
No
No
Enrolled Agents
Yes
Yes
No
No
No
Registered Tax Return Preparers
Yes
Yes
Yes
Yes
Yes
Supervised Preparers
Yes
Yes
Yes
No
No
Non-1040 Preparers
Yes
Yes
Yes
No
No
The IRS and Prometric have provided the following as suggested study materials:
• Publication 17, Your Federal Income Tax
• Form 1040, U.S. Individual Income Tax Return
• Form 1040 Instructions
• Circular 230, Regulations Governing Practice before the Internal Revenue Service (rev. 8/2/11)
• Publication 334, Tax Guide for Small Business
• Publication 970, Tax Benefits for Education
• Publication 1345, Handbook for Authorized IRS e-file Providers
• Form 6251, Alternative Minimum Tax – Individuals
• Form 6251 Instructions
• Form 8879, IRS e-File Signature Authorization
More details on the sections to be covered on the exam can be found in an extensive IRS document found here.
You can register for the test as soon as it is made available on the prometric site (unavailable at time of posting). The test fee will be between $100 and $125 and has not yet been determined. If you are subject to these new requirements the IRS will, in all likelihood, contact you with further information. Keep in mind though, tax season is rapidly approaching so it wouldn’t be a bad idea to start hitting the books now.