Return Preparer Test and Requirements

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
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.