IRS Commissioner Predicts Relief From Testing and Continuing Education for CPA-Supervised Nonsigning Preparers

The IRS will likely provide relief from testing and continuing education requirements for nonsigning tax preparers working under the supervision of a CPA or other federally authorized tax practitioner, such as an attorney or enrolled agent, in a CPA or other professional firm, IRS Commissioner Doug Shulman said October 26.

In his keynote speech at the AICPA’s National Tax Conference in Washington, Shulman acknowledged the Institute’s concerns about the IRS’ new regulatory regime for all paid tax return preparers.

“I am very sympathetic to the argument that the rules should be flexible for people who have met a higher professional standard,” Shulman said. “Therefore it is highly likely that as we implement the new rules and procedures there will be some relief for testing and continuing education requirements” for such nonsigning preparers supervised by a CPA, enrolled agent or attorney.

“I am very pleased with this development,” said Edward Karl, AICPA vice president–taxation. “It recognizes that CPAs, and CPA firms, are already subject to a strong and long-standing regulatory regime.” Federally authorized tax practitioners including CPAs are already exempt from the testing and continuing-education requirements.

Also, Shulman said in his speech, the IRS will waive its new continuing-education requirement for all return preparers to whom it would otherwise apply in the first year of implementation of the new regulatory regime. Shulman said the delayed start for testing was one of several transitional issues the Service is working through. He said the overall regulatory initiative will continue to move forward.

CPAs and other highly trained tax practitioners are “allies” in the IRS’ goals of “working smarter” and adapting to change, he said. Shulman pointed to the Service’s Sept. 28 deployment of its online application for preparer tax identification numbers (PTINs) as a major step toward the ultimate goal of allowing taxpayers to have greater confidence in the competence and honesty of the large group of previously unregulated return preparers, as well as enable the Service to better track “bad actors” among them. The IRS estimates there are about 1 million paid tax preparers, he said.

Shulman also announced an administrative move within the IRS that he said will improve its implementation of the remaining steps of the preparer initiative. David R. Williams, director of the IRS office in charge of electronic tax administration, will head a new Return Preparer Office that will have broad responsibility for the initiative. It will manage the registration system and continuing education and competency testing of preparers. Williams, who was present at Shulman’s speech and spoke in a conference session later on October 26, will report directly to Steven T. Miller, deputy commissioner for services and enforcement. Williams’ work will complement that of Karen Hawkins, director of the IRS’ Office of Professional Responsibility, which will also have important new directives and more resources to ensure ethical and competent conduct by preparers, Shulman said.

The AICPA has expressed support for the IRS’ goal of increasing preparer accountability and competence but has also called upon the Service to reconsider the practicality of its timetable and the scope with regard to certain parts of its plan, to allow more deliberate alignment with established safeguards and better serve the interests of efficient and orderly administration. It is partly for this reason that the AICPA has asked the Service to delay implementation of its examination. Focusing on the roll-out of registration, issuance of the PTINs and implementation of Circular 230 changes, together with compliance tracking, will allow IRS to determine whether the added burden of testing is even necessary, the AICPA has said. The Institute has called for some type of cost-benefit study of portions of the proposed plan.

In an IRS hearing earlier in October, Karl described the Institute’s concerns regarding proposed amendments to Circular 230 and the PTIN requirements. The regulations (REG-138637-07) would bring previously unregulated preparers—the new category of what the IRS calls “registered tax return preparers”—within certain standards of Circular 230, which currently governs federally authorized tax practitioners.

Also on October 26, the IRS issued transition relief from the PTIN requirement for tax return preparers who do not have a Social Security number either because they are foreign or because they have a conscientious religious objection. The PTIN requirement—which applies equally to CPAs and previously unregulated preparers who plan to prepare returns in the 2011 filing seasons—supplants the IRS’ previous allowance of preparers’ using either a PTIN or Social Security number on returns. A Social Security number, however, is required in the new PTIN application form. The relief will allow foreign preparers and U.S. citizens who have a conscientious religious objection to obtaining a Social Security number to provide alternative documentation in lieu of a Social Security number and to prepare returns while they are obtaining a PTIN.

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