At one time virtually anyone could prepare federal income taxes and charge a fee. In 2010, a new set of regulations were implemented that require tax return preparers to register with the IRS if they plan to provide services in 2011 and beyond.
The registration process involves three sets of requirements. A tax preparer needs to sign up with the IRS, she needs to undergo competency testing, and she needs to meet the continuing education requirement.
Purpose
The IRS believes that requiring tax preparers to register will help to accomplish three things. First, it will improve the protection and service provided to the individuals who pay to have their taxes prepared. Second, it will increase confidence in the tax system. Third, it will result in a higher level of compliance.
PTIN
Anyone who wants to prepare tax returns for others must have a preparer tax identification number (PTIN), including those who already have one. Obtaining this number involves going to the IRS' website and signing up. A fee will be charged for the PTIN and an annual fee is required to keep the number.
Competency
A person will not be officially recognized as a tax return preparer until they have passed a competency test.
The IRS says that tax return preparers who have PTINs before testing is available will have until December 31, 2013 to pass the test. Once the test is available, tax preparers need to pass it before obtaining a PTIN.
Certain individuals will be exempt from taking a competency test. These include certified public accounts and retirement fund agents who only prepare income tax returns for that reason.
Continuing Education
Part of the IRS's registration program involves continuing education, which will consist of at 15 hours per year. That instruction needs to include 10 hours of tax law, 3 hours of federal tax law updates, and 2 hours of ethics.
Certain individuals, such as attorneys and enrolled actuaries, will be exempt from this requirement.
Suspension
A registered tax preparer should be careful to comply with the legal and ethical standards outlined by the IRS or she could be barred from providing services.
Legal Advice
The IRS tax preparer registration program will be implemented in phases. Considering that, the exemptions, and the need to understand which conduct may lead to suspension, it is wise for tax return preparers to contact an attorney who can advise them how to comply with these regulations.
