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The role of third parties in preparing tax returns has become increasingly more important. In 2007 and 2008, over 80% of all federal individual income tax returns were prepared by paid tax preparers or by taxpayers using tax preparation software. The exact number of paid preparers is unknown, but the IRS estimates that it may be as high as 1.2 million. Several oversight groups, such as the IRS National Taxpayer Advocate, 1 the General Accounting Office (GAO), 2 and the Treasury Inspector General for Tax Administration (TIGTA), 3 have identified errors and noncompliance related to the earned income tax credit and sole proprietorship tax returns prepared by national tax preparation chains and unenrolled preparers. In addition, several bills have been introduced over the years calling for tax return preparer regulation. 4
One recurring criticism of the tax return preparer industry was that anyone was permitted to prepare a federal tax return for another person for a fee, regardless of competence or adherence to ethical or professional standards. Another criticism was that tax return preparers are subject to varying degrees of oversight depending on a number of factors, such as whether the preparer is enrolled to practice before the IRS, whether the preparer is a CPA or attorney, whether the preparer chooses to file electronically, and the jurisdiction in which the preparer practices. In 2009, the IRS began to address these concerns.
In April 2009, the IRS called for strengthening its partnership with tax practitioners and ensuring that tax return preparers and other third parties in the tax system strive for high standards of professional ethics and compliance, as set out in its goals in the 2009–2013 Strategic Plan. 5 IRS Commissioner Douglas Shulman next launched the IRS’s Return Preparer Review in June 2009. During that process, the IRS held forums around the country and received public comments that generally supported increased oversight of tax return preparers, especially for those individuals who were not enrolled to practice before the IRS. On January 4, 2010, the IRS released Publication 4832, Return Preparer Review Report.
The report included the following recommendations:
- The IRS should implement a general requirement that tax return preparers register with the IRS;
- Tax return preparers should be subject to competency examinations;
- Tax return preparers should be required to take continuing education;
- The Circular 230 6 ethical rules should be extended to all tax return preparers; and
- The IRS should make certain public awareness and service enhancements with respect to tax return preparers.
The IRS adopted these recommendations by establishing a tax return preparer regime that includes the following components:
- Setting a limit on who can prepare federal tax returns for compensation: Regs. Sec. 1.6109-2 provides that only an individual who obtains a preparer tax identification number (PTIN) can prepare a tax return (PTIN regulations). Regulations provide that only certified public accountants (CPAs), attorneys, enrolled agents, and a new class of tax return preparer, the “registered tax return preparer,” are eligible to obtain a PTIN. Preparers are required to use their PTIN when signing all tax returns, forms, or claims for refund (except for certain specified returns and forms, as discussed in note 8 on p. 328), starting January 1, 2011.
- Ensuring that all tax return preparers meet certain competency and training requirements: CPAs, attorneys, and enrolled agents are regulated and subject to professional standards that generally include competency and training requirements. To ensure that new registered tax return preparers also meet minimum levels of competency and training, the IRS is establishing testing and continuing education requirements under Circular 230 for PTIN holders who are not CPAs, attorneys, or enrolled agents. 7
This article focuses on the new preparer regulation requirements and proposed changes in professional responsibility. Specifically, it discusses who is required to obtain a PTIN and the changes to Circular 230.
Who Is Required to Obtain a PTIN?
Under the PTIN regulations, an individual is required to obtain a PTIN if the individual (1) is a tax return preparer under Sec. 7701(a)(36) and the regulations thereunder and (2) prepares or assists in preparing all or substantially all of a tax return or claim for refund. These rules are discussed in more detail below.
The Definition of a Tax Return Preparer
An individual is required to obtain a PTIN under the PTIN regulations if the individual is a tax return preparer under Sec. 7701(a)(36) and the regulations thereunder. Sec. 7701(a)(36)(A) provides that a tax return preparer is any person who prepares for compensation, or who employs one or more persons to prepare for compensation, all or a substantial portion of a federal tax return or claim for refund. This definition includes both signing and nonsigning tax return preparers as those terms are defined in Regs. Sec. 301.7701-15(b). Therefore, the PTIN regulations apply to both signing and nonsigning tax return preparers.
The Code and regulations provide several exceptions to the Sec. 7701 definition of a tax return preparer, including an exception for individuals who furnish only typing, reproducing, or other mechanical assistance (mechanical assistance exception), certain in-house tax practitioners, certain fiduciaries, and individuals who provide services only through VITA, low-income tax clinics, and other similar organizations. For more details on these exceptions, see Regs. Sec. 301.7701-15(f). Thus, an individual who is not a Sec. 7701 tax return preparer by reason of one of these exceptions is not required to obtain a PTIN under the PTIN regulations. 8
In the typical CPA’s office, these rules mean that the CPA will be required to analyze the work performed by each member of support staff and determine, based on the facts and circumstances, who is a tax return preparer and who is not (because the individual meets the mechanical assistance exception or some other exception). For each individual who is a Sec. 7701 tax return preparer, the CPA will then have to engage in a second facts-and-circumstances analysis, described below, to determine if the individual prepares or assists in preparing “all or substantially all” of any tax return or claim for refund and is therefore required to obtain a PTIN.
Preparing “All or Substantially All” of a Tax Return or Claim for Refund
Once it is determined that an individual is a Sec. 7701 preparer, the next step is to decide whether the individual prepares or assists in preparing all or substantially all of a tax return or claim for refund. Professional judgment will often be required to determine what constitutes “all or substantially all” of a tax return or claim for refund.
Regs. Sec. 1.6109-2(g) provides factors to determine whether an individual is a tax return preparer, including, but not limited to, the following:
- The complexity of the work the individual performs relative to the overall complexity of the tax return or claim for refund of tax;
- The amount of the items of income, deductions, or losses attributable to the work the individual performs relative to the total amount of income, deductions, or losses required to be correctly reported on the tax return or claim for refund of tax; and
- The amount of tax or credit attributable to the work the individual performs relative to the total tax liability required to be correctly reported on the tax return or claim for refund of tax.
The regulations further provide that the preparation of a form, statement, or schedule, such as Schedule EIC, Earned Income Credit, may constitute the preparation of all or substantially all of a tax return or claim for refund based on the application of the foregoing factors.
While a signing tax return preparer generally will be treated as preparing all or substantially all of a tax return, and therefore will be required to obtain a PTIN, it can be much more difficult to determine whether a nonsigning tax return preparer must obtain a PTIN. The PTIN regulations state that the factors listed above are not all-inclusive. Therefore, the determination of whether an individual’s involvement with the return preparation process rises to the level of a tax return preparer required to obtain a PTIN under Regs. Sec. 1.6109-2 will often depend on the facts and circumstances related to the individual’s activities, as well as the impact of those activities on the returns with which they are associated.
Regulatory Examples
The final regulations contain four examples to illustrate the provisions of Regs. Sec. 1.6109-2(g) for determining who is a tax return preparer. These examples do not provide a much-needed bright-line test; however, they do offer some insight into factors that the IRS considers important in determining whether the individual is required to obtain a PTIN. While all four examples provide useful guidance to CPA firms, Examples 1 and 2 are especially useful because they address the very common situation of using nontraditional return preparers during the busy filing season.
Example 1: A, an individual employed by tax return preparer B, assists B in answering telephone calls, making copies, entering client tax information gathered by B into the data fields of tax preparation software, and using the computer to file electronic tax returns prepared by B. Although A must exercise judgment regarding which data fields to use in the tax preparation software, she does not exercise any discretion or independent judgment as to the clients’ underlying tax positions. A therefore merely provides clerical assistance or incidental services and is not a tax return preparer required to apply for a PTIN or other identifying number as the IRS may prescribe in forms, instructions, or other appropriate guidance.
Example 2: The facts are the same as in Example 1, except that A also interviews B’s clients and obtains from them information needed for the preparation of tax returns. A determines the amount and character of entries on the returns and whether the information provided is sufficient for purposes of preparing the returns. For at least some of B’s clients, A obtains information and makes determinations that constitute all or substantially all of the tax return. A is therefore a tax return preparer required to apply for a PTIN or other identifying number as the IRS may prescribe in forms, instructions, or other appropriate guidance. A is a tax return preparer even if she relies on tax preparation software to prepare the return.
In Example 1, the facts show that the employee does not exercise any discretion or independent judgment as to clients’ underlying tax positions. Because the employee merely provides clerical assistance or incidental services, the employee is not required to obtain a PTIN. Note that this example does not provide any analysis to support its conclusion that the employee did not exercise discretion or independent judgment.
The employee in Example 2 interviews clients and obtains from them information needed for the preparation of tax returns. The key distinction between Example 1 and Example 2 appears to be that the employee in Example 2 exercises discretion or independent judgment as to underlying tax positions, determines the amount and character of entries on returns, and decides whether the information provided is sufficient for purposes of preparing the returns. Given these facts, Example 2 concludes that for at least some clients, the employee obtains information and makes determinations that constitute all or substantially all of the tax return and is therefore required to obtain a PTIN. Again, this example does not provide any analysis to support the conclusion that this employee exercised discretion and independent judgment, determined the amount and character of entries on returns, and decided whether the information was sufficient to prepare the returns.
The IRS has also provided additional guidance in the form of FAQs on its website. 9 While the examples provided in Regs. Sec. 1.6109-2(g) and the FAQs are useful, determining whether an individual is a tax return preparer under the PTIN regulations requires professional judgment after considering all pertinent facts and circumstances. The following FAQ from the IRS website illustrates this point:
Q: I run a small tax return preparation business that is heavily software-based. I employ four associates who sit with taxpayers and walk through a step-by-step software program that uses an “interview” process that results in a draft tax return. I check and sign the returns, and I have a PTIN. Do my four associates need to have a PTIN?
A: You will need to perform additional analysis to determine whether your four associates must have a PTIN. The answer depends on the specific circumstances of your firm. In general, if individuals prepare all or substantially all of a tax return, including making determinations that affect tax liability, they must have a PTIN.
The PTIN regulations contain two more examples.
Example 3: C is an employee of a firm that prepares tax returns and claims for refund of tax for compensation. C is responsible for preparing a Form 1040, U.S. Individual Income Tax Return, for a client. C obtains the information necessary for preparing the tax return during a meeting with the client and makes determinations about the proper application of the tax laws to the information in order to assess the client’s tax liability. C completes the tax return and sends the completed return to employee D, who reviews the return for accuracy before signing it. Both C and D are tax return preparers required to apply for a PTIN or other identifying number as the IRS may prescribe in forms, instructions, or other appropriate guidance.
As in Example 2, the individual who obtains the information necessary for the preparation of the tax return, makes determinations about the proper application of the tax laws to the information in order to assess the taxpayer’s liability, and completes the return will be required to obtain a PTIN. In addition, the person who reviews the return for accuracy and signs it will also be required to obtain a PTIN.
Example 4 describes a situation in which the nonsigning preparer is not required to obtain a PTIN. This example seems to indicate that an individual who addresses particular issues in which the individual is a subject matter specialist may not be treated as preparing all or substantially all of a tax return.
Example 4: E is an employee at a firm that prepares tax returns and claims for refund of tax for compensation. The firm is engaged by a corporation to prepare its federal income tax return on Form 1120, U.S. Corporation Income Tax Return. Among the documentation that the corporation provides to E is documentation relating to the corporation’s potential eligibility to claim a recently enacted tax credit for the tax year. In preparing the return, and specifically for purposes of the new tax credit, E (with the corporation’s consent) obtains advice from F, a subject matter expert on this and similar credits. F advises E as to the corporation’s entitlement to the credit and provides his calculation of the amount of the credit. Based on this advice, E prepares the corporation’s Form 1120 claiming the tax credit in the amount recommended by F.
The regulation specifies that the additional credit is one of many tax credits and deductions claimed on the tax return, and says that determining the credit amount does not constitute preparation of all or substantially all of the corporation’s tax return under Regs. Sec. 1.6109-2(g). F will not be considered to have prepared all or substantially all of the corporation’s tax return, and F is not a tax return preparer required to apply for a PTIN or other identifying number. According to the example, the analysis is the same whether or not the tax credit is a substantial portion of the return under Regs. Sec. 301.7701-15 (as opposed to substantially all of the return) and whether or not F is in the same firm with E. E, on the other hand, is a tax return preparer required to obtain a PTIN.
The example appears to rely on two facts to conclude that the subject matter specialist is not required to obtain a PTIN: (1) the credit is one of many tax credits and deductions claimed on the return, and (2) determining the credit does not constitute preparation of all or substantially all of the return. However, because the example assumes that determining the amount of the credit does not constitute preparation of all or substantially all of the return, the example provides little insight into the meaning of “all or substantially all.” 10
Because these examples are vague and assume away certain key facts (e.g., that the individual determines the amount and character of entries on the return and that determining the credit amount is not preparation of all or substantially all of the return), they leave many CPAs wondering whether they and their staff, many of whom are unlicensed (i.e., are not CPAs, attorneys, or enrolled agents), will be required to obtain a PTIN.
If a CPA is unsure about whether he or she will be preparing or assisting in preparing all or substantially all of a tax return or claim for refund, the CPA is likely to err on the side of caution, pay the $64.25, and obtain a PTIN. However, for some unlicensed staff, obtaining a PTIN could mean more than just paying a fee—it could also mean meeting IRS testing and training requirements. In December 2010, the IRS provided some relief from the testing and training requirements for nonsigning preparers who are employed by CPAs, attorneys, or enrolled agents, but not all unlicensed staff will comply with the requirements of Notice 2011-6 (discussed on p. 332 below) or be able to meet these requirements.
Applying for and Obtaining a PTIN
On September 28, 2010, the IRS launched an online PTIN application system 11 for preparers to use to obtain a new PTIN or renew an existing PTIN. Applicants must pay a fee of $64.25, which consists of a $50 IRS user fee and a $14.25 fee charged by the site’s third-party administrator. As an alternative, preparers may submit a paper application on Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application.
After numerous reports of delays with the new system, in January 2011 the IRS granted some relief to return preparers with pending PTIN applications who had made a good-faith effort to obtain a PTIN but had not yet received one. 12 Under this relief, the IRS will permit preparers who meet criteria specified in Notice 2011-11 and who receive notification from the IRS that it was unable to process their online PTIN application (or who receive an acknowledgment of receipt of Form W-12) to prepare and file tax returns or claims for refund for compensation after the tax return preparer complies with all instructions provided in the notification or acknowledgment letter. These preparers can use a PTIN issued before September 28, 2010, or their Social Security number if they do not have a previously issued PTIN, during the 2011 filing season or until they receive a new PTIN, whichever is earlier.
Preparers Without an SSN
The PTIN regulations apply to all tax return preparers regardless of citizenship or residency. However, because the regulations did not specifically address foreign tax return preparers and other preparers who do not have a Social Security number (SSN), the IRS issued guidance and temporary relief for these preparers in Rev. Proc. 2010-41. 13
Rev. Proc. 2010-41 permits an individual who does not have an SSN to obtain a PTIN if the applicant provides supplemental documentation to verify his or her identity and substantiate the applicant’s status as a member of one of two groups: U.S. residents who have a conscientious objection to obtaining an SSN for religious reasons, and foreign preparers who do not have or are not eligible for an SSN and are neither U.S. citizens nor resident aliens of the United States (as defined in Sec. 7701(b)(1)(A)).
As set forth in Rev. Proc. 2010-41, these individuals will still be required to apply for a PTIN either online or by filing a paper Form W-12. In addition, these individuals will have to complete an additional paper form and attach documentation establishing identity and status. For U.S. residents who have a conscientious objection to obtaining an SSN for religious reasons, this additional form is Form 8945, PTIN Supplemental Application for U.S. Citizens Without a Social Security Number Due to Conscientious Religious Objection, and for foreign preparers it is Form 8946, PTIN Supplemental Application for Foreign Persons Without a Social Security Number. Additional documentation must be submitted with Forms 8945 and 8946. In FAQs published on the IRS website, the IRS has modified the type of documentation required to be submitted by foreign preparers with the Form 8946 and will be updating the instructions on the form accordingly.
Recognizing that this application process may require more time to complete, Rev. Proc. 2010-41 also provides temporary relief for these individuals. For purposes of the 2011 filing season, tax return preparers who are foreign persons or U.S. citizens without an SSN due to conscientious religious objection will be considered to have complied with the requirement to obtain a PTIN set forth in the final regulations, and therefore may prepare federal tax returns and claims for refund, if they complete the online application or submit a completed paper Form W-12 (along with payment of the user fee) by the later of January 31, 2011, or 10 days after the first day on which they prepare all or substantially all of a U.S. tax return for compensation, and they submit a completed PTIN supplemental application, Form 8945 or Form 8946, including any required additional documentation, within 60 days after the completion of Form W-12.
Circular 230 Regs.
On August 19, 2010, the IRS released proposed regulations 14 that, among other revisions to Circular 230, would create a regulatory framework, including testing and training requirements, for the new IRS-designated tax return preparer, called a “registered tax return preparer.” The proposed regulations would also expand coverage of Circular 230 to all tax return preparers, not just preparers who are CPAs, attorneys, or enrolled agents. This section of the article describes the outlines of this proposed regulatory framework and considers some of the implications for registered tax returns preparers of being regulated by Circular 230.
All Preparers Subject to Circular 230 Discipline
Circular 230 governs who may practice before the IRS 15 and governs the conduct of those individuals, referred to as “practitioners.” Under current Circular 230, only CPAs, attorneys, and enrolled agents are practitioners, and only preparation of returns by these practitioners is subject to discipline under Circular 230. Proposed Circular 230 Section 10.2(a)(8) would expand coverage of Circular 230 to provide that preparing all or substantially all of a federal tax return would constitute practice before the IRS, and therefore anyone who prepares all or substantially all of a tax return would be subject to discipline under Circular 230.
The authorization to practice extends only to practitioners who are not under suspension or disbarment from practice before the IRS. Accordingly, by clearly stating that practice before the IRS includes signing or preparing all or substantially all of a tax return, the proposed regulations allow the IRS to regulate all tax return preparers and, through disbarment or suspension, bar a tax return preparer who is found to have violated the requirements of Circular 230 from preparing returns. Furthermore, under Circular 230 Section 10.24, “a practitioner may not, knowingly and directly or indirectly: (a) Accept assistance from or assist any person under disbarment or suspension from practice before the Internal Revenue Service if the assistance relates to a matter or matters constituting practice before the Internal Revenue Service.” Consequently, a tax return preparer who is suspended or disbarred from practice before the IRS will not be authorized to prepare federal tax returns for compensation. The practical import of Section 10.24 is that an individual who has been suspended or disbarred may not assist another tax return preparer with the preparation of federal tax returns, which obviously can have severe economic consequences for the disbarred or suspended practitioner.
A detailed discussion of all the relevant rules that would apply to registered tax return preparers as a consequence of their status as Circular 230 practitioners is beyond the scope of this article. However, as a brief survey, the Circular 230 rules that will affect registered tax return preparers include the rules mandating due diligence in the preparation of returns and other documents, 16 the restrictions on contingent fees with respect to many federal tax matters, 17 the rules relating to return of client records, 18 the rules on conflicts of interest, 19 and the rules regulating advertising and solicitation. 20
New Registered Tax Return Preparer Designation
Proposed Section 10.5 governs the application to become a tax return preparer, including the form of the application, 21 the fee, 22 and compliance and suitability checks. 23 Proposed Section 10.5(e) sets forth the rules under which the director of the Office of Professional Responsibility may grant an applicant temporary recognition to practice. Proposed Section 10.5(f) sets forth appeal rights if the IRS denies a registered tax return preparer application. Proposed Section 10.6(d)(4) sets forth rules for the renewal period for registered tax return preparers and provides that the requirements will be prescribed in forms, instructions, or other appropriate guidance.
Proposed Section 10.3(f)(1) provides that any individual designated as a registered tax return preparer who is not currently under suspension or disbarment from practice before the IRS may practice before the IRS. Proposed Section 10.3(f)(2) provides that practice as a registered tax return preparer is limited to preparing tax returns, claims for refund, and other documents for submission to the IRS. Specifically, a registered tax return preparer may prepare, or assist in preparing, all or substantially all of a tax return or claim for refund for which he or she has passed the requisite written examination. Also, a registered tax return preparer may represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the IRS during an examination if the registered tax return preparer signed the tax return or claim for refund for the tax year or period under examination.
Proposed Section 10.3(f)(2) also notes limitations on the scope of practice of a registered tax return preparer. The first is implicit in the rule allowing a registered tax return preparer to represent a taxpayer in an IRS examination for a tax year if the tax return preparer signed the return for that year. The registered tax return preparer is therefore not authorized to represent a taxpayer for a year under examination if that preparer did not sign the return or claim for refund for that year.
Furthermore, two explicit limitations are set forth in Proposed Section 10.3(f)(2). First, unless otherwise proscribed by regulation or notice, the right of a signing registered tax return preparer to represent a taxpayer in an examination does not permit the individual to represent the taxpayer, regardless of the circumstances requiring representation, before Appeals officers, revenue officers, counsel, or similar officers or employees of the IRS or Treasury. Second, a registered tax return preparer’s authorization to practice does not include the authority to provide tax advice to a client or another person except as necessary to prepare a tax return, claim for refund, or other document intended to be submitted to the IRS.
Proposed Section 10.30(a) provides in relevant part that a tax return preparer, in describing his or her professional designation, may not use the term “certified” or imply an employer-employee relationship with the IRS. The proposed section states, “An example of an acceptable description for registered tax return preparers is ‘designated as a registered tax return preparer with the Internal Revenue Service.’”
Testing and Training for Registered Tax Return Preparers
Under the proposed regulations, the Circular 230 framework requires that registered tax return preparers must pass a competency test and meet annual continuing education requirements. The IRS has stated that an unlicensed individual who applies to be a registered tax return preparer and who obtains a PTIN before the test is available will have until 2013 to pass the test. 24 The IRS is also waiving the continuing education requirements for 2011 for these individuals. 25
Proposed Circular 230 Section 10.4(c) provides that the director of the Office of Professional Responsibility may designate an individual as a registered tax return preparer provided the applicant demonstrates competence in federal tax return preparation matters by written examination administered by, or administered under the oversight of, the IRS, possesses a current or otherwise valid PTIN or other proscribed identifying number, and has not engaged in any conduct that would justify the suspension or disbarment of a practitioner under Circular 230. 26
Proposed Section 10.6(e)(3) creates a continuing education requirement for tax return preparers. 27 These rules would require that a minimum of 15 hours of continuing education credit, including 2 hours of ethics or professional conduct, 3 hours of federal tax law updates, and 10 hours of federal tax law topics, must be completed during each registration year. Proposed Section 10.6(f)(1)(iii) sets forth the requirements that a course must meet to qualify for continuing education credit for a registered tax return preparer. Central to the proposal is the requirement that to count for credit, the course must be a qualifying continuing education program. The rules for a qualifying continuing education program are further detailed in Proposed Section 10.6(f)(2), which includes a requirement that the course be approved as a qualified continuing education program by the director of the Office of Professional Responsibility under the rules contained in Proposed Section 10.9.
Notice 2011-6 provides for an exception to these examination and continuing education requirements for nonsigning preparers who work for CPA firms and certain other professional firms. Under the notice, an individual who prepares all or substantially all of a tax return will be exempt from the examination and continuing education requirements if:
- The individual is supervised by a CPA, attorney, enrolled agent, enrolled retirement plan agent, or enrolled actuary authorized to practice before the IRS under Circular 230;
- The supervising professional signs the tax returns or claims for refund prepared by that individual;
- The individual is employed by the CPA firm, law firm, or “other recognized firm” of the tax return preparer who signs the tax return or claim for refund; and
- The individual passes the requisite tax compliance check and suitability check (when available).
Nonsigning preparers seeking to come under this exemption will be required to certify on the PTIN application that they are supervised by a CPA, attorney, enrolled agent, enrolled retirement plan agent, or enrolled actuary who signs the tax return or claim for refund prepared by that nonsigning preparer. Notice 2011-6 adds that the IRS may also require these individuals to provide the supervising individual’s PTIN or other number.
Conclusion
IRS regulation of tax return preparers has significantly changed the rules and increased the cost of being a tax return preparer. The question is whether this cost will result in raising the competency and professional standards of unlicensed preparers. One way to measure whether IRS tax return preparer regulation is successful is to look at who is obtaining a PTIN. Unless preparers other than those who are already regulated and subject to professional and ethical standards (i.e., CPAs, attorneys, and enrolled agents and their employees) obtain PTINs, this cumbersome and expensive process will not address the concerns that spurred tax return preparer regulation in the first place.
The IRS website has detailed information on tax return preparer regulation, including links to its online PTIN application, frequently asked questions, and information about contacting the IRS for assistance. 28 In addition, the IRS has established a Tax Professional PTIN Information Line (877-613-PTIN (7846)) and a toll line for international callers (+1 319-464-3272) that are open from 8 am to 5 pm CST Monday–Friday.
Footnotes
1 National Taxpayer Advocate, 2009 Annual Report to Congress, Vol. 1 (December 31, 2009).
2 See GAO, Testimony Before Senate Finance Committee, Paid Tax Preparers: Most Taxpayers Believe They Benefit, but Some Are Poorly Served; Statement of James R. White, Director, Tax Issues (GAO-03-610T) (April 1, 2003); GAO, Testimony Before Senate Finance Committee, Paid Tax Preparers: In a Limited Study, Chain Preparers Made Serious Errors; Statement of Michael Brostek, Director, Strategic Issues (GAO-06-563T) (April 4, 2006); GAO, Report to Senate Finance Committee, Tax Preparers: Oregon’s Regulatory Regime May Lead to Improved Federal Tax Return Accuracy and Provides a Possible Model for National Regulation (GAO-08-781) (August 2008).
3 TIGTA, Inadequate Data on Paid Preparers Impedes Effective Oversight (2009-40-098) (July 14, 2009).
4 See S. 3215 and H.R. 5047, introduced by Senator Jeff Bingaman and Representative Xavier Becerra, respectively, in April 2010. See also H.R. 5716, introduced by Representative Becerra in April 2008, and S. 832, introduced by Senator Bingaman in April 2005.
5 Publication 3744, IRS Strategic Plan (Fiscal Years 2009–2013) (April 2009).
6 Treasury Circular 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, Enrolled Retirement Plan Agents, and Appraisers Before the Internal Revenue Service (31 C.F.R. Part 10).
7 See REG-138637-07, proposed modifications to Circular 230 (August 2010); and Notice 2011-6, 2011-3 I.R.B. 315.
8 In addition, a preparer is not required to furnish a PTIN for certain forms specifically identified by the IRS. See Notice 2011-6, §1.03, Forms Requiring PTIN, and IRS, New Requirements for Tax Return Preparers: Frequently Asked Questions. If a tax return preparer prepares only those forms specifically listed in this section of the notice, the preparer is not required to obtain a PTIN.
9 See New Requirements for Tax Return Preparers: Frequently Asked Questions.
10 Compare the following FAQ, which was posted on the IRS’s website on March 4, 2011:
10. Is an attorney or a certified public accountant required to obtain a PTIN if the attorney or certified public accountant only advises a client regarding an issue that is reflected on a claim for refund?
An attorney or certified public accountant is required to obtain a PTIN if the attorney or certified public accountant prepares, or assists in preparing, all or substantially all of a return or claim for refund. Under the authority of section 1.6109-2(h), however, an attorney or certified public accountant will not be required to obtain a PTIN if the attorney or certified public accountant only advises a client regarding an issue that is reflected on a claim for refund and neither the attorney or certified public accountant nor any person in the firm of the attorney or certified public accountant signs or is required to sign the claim for refund under Treasury Regulation sections 301.7701-15(b)(1) and 1.6695-1(b). The attorney or certified public accountant in question is still a nonsigning tax return preparer subject to penalty under section 6694 if the attorney or certified public accountant has prepared all or a substantial portion of the claim for refund within the meaning of Treasury Regulation section 301.7701-15(b)(3).
11 Available on the IRS website.
12 Notice 2011-11, 2011-7 I.R.B. 497.
13 Rev. Proc. 2010-41, 2010-48 I.R.B. 781.
14 REG-138637-07. References to proposed sections in the paragraphs that follow are references to the amendments to Circular 230 proposed on August 19, 2010.
15 See Circular 230, §10.3.
16 Circular 230, §10.22(a)(1).
17 Circular 230, §10.27.
18 Circular 230, §10.28.
19 Circular 230, §10.29.
20 Circular 230, §10.30.
21 Proposed Circular 230, §10.5(a).
22 Proposed Circular 230, §10.5(b).
23 Proposed Circular 230, §10.5(d).
24 See Notice 2011-6, §2.01, Provisional PTINs.
25 See Notice 2011-6, §2.04, Continuing Education.
26 The written examination requirement will begin in mid-2011 (see IRS, New Return Preparer Regulations—Overview). Note that attorneys, CPAs, and enrolled agents that are active and in good standing with their licensing agency are exempt from the test requirements.
27 Note that attorneys, CPAs, and enrolled agents that are active and in good standing with their licensing agency are exempt from the continuing education requirements. See New Return Preparer Regulations—Overview.
28 See New Return Preparer Regulations—Overview.
EditorNotes
Rochelle Hodes is with PricewaterhouseCoopers, LLP, in Washington, DC, Danny Snow is with Thompson Dunavant PLC in Memphis, TN, Ed Swails is with Ernst & Young, LLP, in Washington, DC, and Mark VanDeveer is with Mark A. VanDeveer PC in Virginia Beach, VA. Mr. Snow is the chair and Ms. Hodes and Mr. VanDeveer are members of the AICPA’s IRS Practice and Procedures Committee. For more information about this article, contact Ms. Hodes at rochelle.hodes@us.pwc.com.
