AICPA Comments on IRS PTIN Proposal

AICPA Activities

On April 26, the AICPA submitted comments to the IRS on its proposed regulations (REG-134235-08) that would require tax return preparers, including nonsigning preparers, to apply for or renew a preparer tax identification number (PTIN) and exclusively use that PTIN when signing tax returns. The next week, Patricia Thompson, vice chair of the AICPA’s Tax Executive Committee, reiterated the AICPA position at an IRS hearing on the plan. (For more on the IRS proposal, see News Notes, “IRS Issues Prop. Regs. on Use of PTINs After 2010,” 41 The Tax Adviser 371 (June 2010).)

The letter accompanying the AICPA’s comments, signed by Alan Einhorn, chair of the AIPCA’s Tax Executive Committee, says:

The AICPA believes the issuance of one unique identifying number to each tax return preparer, coupled with making all preparers subject to the professional ethics standards of Circular 230 and the Code’s civil preparer penalty regime, will prove to be an effective method for addressing [IRS] concerns about taxpayers receiving competent and ethical service from qualified tax professionals.

However, the letter says that the AICPA has “serious concerns with aspects of the proposed regulations; and most notably the nonsigning preparer construct.”

The AICPA’s comments focus on (1) the extension of the PTIN requirement to nonsigning employees of CPA firms; (2) the appropriate title for persons receiving a PTIN; (3) the IRS’s imposition of “reasonable user fees”; (4) foreign preparers; and (5) the comment period deadline.

In addition to addressing the PTIN proposed regulations, the AICPA’s comments also ask the IRS to delay its proposed plan to examine return preparers because

(1) a successful implementation of registration and use of PTINs, along with the imposition of Circular 230 on all preparers should be sufficient to address unethical and/or incompetent tax return preparation and provide tremendous gains to tax administration in general; (2) it may cause confusion among taxpayers about the relative qualifications of tax return preparers; and (3) the additional burdens to the tax preparers and pass through of these costs to the taxpaying public should be considered.

Nonsigning Employees of CPA Firms

The AICPA’s comments recommend that the PTIN, testing, and CPE requirements should not apply to nonsigning preparer-employees of CPA firms. Alternatively, the AICPA asks that the requirements not apply to nonsigning preparers working under the supervision of a CPA, attorney, or enrolled agent.

The comments note that there is no need to require all preparers working for the signing preparer to also have PTINs because the IRS will be able to find the incompetent preparers by contacting the signing preparer. Furthermore, regulation of CPAs by state boards of accountancy provides sufficient protection for the public from unscrupulous or incompetent CPAs or CPA firms. When combined with IRS oversight and discipline of CPAs as specified in Circular 230, the AICPA argues, the requirement that the signing preparer obtain and place his or her PTIN on the return “should give the IRS sufficient information to monitor the CPA’s practice without the need to extend the PTIN process to nonsigning preparers.”

The AICPA points out that in Oregon, which has licensed all tax preparers of individual returns for over 25 years, an exemption regime has worked well.

The AIPCA further urges the IRS to also exempt nonsigning employees of CPA firms from any testing and CPE requirements because of the extensive state board of accountancy oversight that exists for CPAs and CPA firms.

Appropriate Title for Persons Receiving a PTIN

In its comments, the AICPA argues that the term “registered tax return preparer,” which the IRS is generally using to refer to formerly unenrolled preparers, may prove misleading to the public, as the term may imply a higher level of professional capability and education when viewed in light of other comparable “registered” professionals (such as registered nurses). The AICPA strongly recommends that the IRS refer to these formerly unenrolled preparers as “authorized tax return preparers” instead.

User Fees

Under the proposed regulations, tax return preparers may be required to pay a user fee when first applying for a PTIN and at every renewal. The AICPA urges that such fees be set as low as possible: “The amount of the user fee should be established with a view toward only covering the costs of issuing the PTIN, and we believe that the fee should not be set with a view towards generating surplus revenues or paying for increased staff to manage the various aspects of preparer regulation.”

The AICPA expects that most CPA firms and sole practitioners will reimburse their employees for PTIN user fees. It feels that the extension of the PTIN requirement to certain nonsigning preparers “would impose potentially significant costs on CPA firms and sole practitioners, particularly with respect to those individuals who are employed on a part-time basis, who only spend part of their time providing tax services, or those who would be associated with returns solely in a nonsigning role.”

Foreign Preparers

Under the current PTIN regime, an individual who does not have a Social Security number cannot receive a PTIN because the application (Form W-7) requires the applicant to provide a Social Security number.

Because many foreign preparers may not have a Social Security number, the AICPA recommends that the IRS consider issuing regulations to allow foreign preparers to provide information in lieu of a Social Security number.

Comment Period Deadline

Finally, the AICPA asks that the IRS be flexible with the comment period deadline (which was April 26). The IRS released the proposed regulations for comment during the height of the tax filing season and provided for only a 30-day comment period. Because of the difficulty CPAs and state CPA societies may have had in responding to the proposed regulations during the busy tax filing season, the AICPA asks the IRS to be flexible about accepting comments after the deadline.