On Monday, the IRS published guidance introducing its new, voluntary Annual Filing Season Program, which permits tax preparers who are not CPAs, attorneys, or enrolled agents to complete tax education requirements and receive a certificate, called a Record of Completion (Rev. Proc. 2104-42).
Continuing education requirements
Tax preparers who complete 18 hours of continuing education from an IRS-approved provider, including six hours of federal tax law updates (called a “refresher course”), 10 hours of federal tax law topics, and two hours of ethics, will receive a Record of Completion that will apply to tax returns completed in the next calendar year. For example, tax preparers who complete these requirements in 2015 will have satisfied the requirements to prepare returns in 2016.
The six-hour refresher course must cover tax law relevant to preparing Form 1040 series forms and schedules and be followed by a test of at least 100 questions that preparers must score 70% on to pass. Certain preparers are exempt from the requirement to complete the six-hour refresher course. These include:
- CPAs, enrolled agents, and attorneys;
- Individuals who passed the now-defunct registered tax return preparer exam;
- Tax return preparers who are licensed or registered by any state, territory, or possession after passing an exam on federal tax matters; and
- Tax return preparers who have passed an exam administered by other entities recognized by the IRS.
The IRS says it will post on its website a list of states and entities whose examinations meet the requirements for this exemption.
Applicants exempt from the refresher course must still complete 15 hours of continuing education, which includes two hours of ethics, 10 hours of tax law, and a three-hour update. For the first year the program is in effect, for the 2015 filing season, a transition rule will permit preparers to satisfy the continuing education requirements with only 11 hours of courses, which must include the six-hour update, two hours of ethics, and three hours of federal tax law.
Application
To participate in the program, preparers must apply through the preparer tax identification number registration system by April 15 of the year for which the Record of Completion is sought. They must sign the application under penalties of perjury and agree to be subject to the duties and restrictions under Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10), for the entire period covered by the Record of Completion.
Effective period for record of completion
The Record of Completion is effective for one calendar year: Once issued, it is effective for tax returns and claims for refund prepared and signed from the later of Jan. 1 of the year covered by the Record of Completion or the date the Record of Completion is issued until Dec. 31 of that year.
Disqualified individuals
Individuals who have been disbarred, suspended, or disqualified from practice before the IRS; convicted of a felony involving a financial matter, tax matter, or other violation of the public trust in the past five years; enjoined from representing persons before the IRS, preparing tax returns, or engaging in other conduct subject to injunction under Sec. 7407; engaged in misconduct that would have violated Circular 230 if the individual had been subject to it; failed to comply with their personal federal tax filing obligations; had their filing season record of completion revoked (see below); or failed to comply with the rules of the Annual Filing Season Program are ineligible to participate.
Representing taxpayers before the IRS
Preparers who obtain a Record of Completion can represent taxpayers before the IRS during an examination of a tax return or claim for refund that they prepared and signed (or prepared if the form has no signature), provided the individual had a valid Annual Filing Season Program Record of Completion for the calendar year in which the tax return or claim for refund was prepared and signed, and has a valid Annual Filing Season Program Record of Completion for the year or years in which the representation occurs.
This taxpayer representation right does not include representation before IRS appeals officers, revenue officers, IRS counsel, or similar IRS employees. For tax returns and claims for refund prepared and signed (or prepared if there is no signature space on the form) after Dec. 31, 2015, this provision modifies and supersedes Rev. Proc. 81-38, which permitted unenrolled preparers to represent before the IRS taxpayers whose return or claim for refund they prepared.
Advertising restrictions
Tax return preparers who receive a Record of Completion will not be allowed to use the terms “certified,” “enrolled,” or “licensed” to describe their status, to imply that they have any sort of employer/employee relationship with the IRS, or to make representations that they are endorsed by the IRS. They may represent that they hold a valid Annual Filing Season Program Record of Completion for that calendar year and that they have complied with the IRS requirements for receiving the Record of Completion.
Revoking Record of Completion and protest procedures
Individuals who fail to comply with the duties and restrictions for practice before the IRS, including this revenue procedure and Circular 230, will have their Record of Completion revoked and may be prohibited from participating in the future depending on the facts and circumstances.
The IRS will notify preparers of the reason for revocation in writing, and the preparers will have 30 days to file a written protest, as will any preparer who is determined to be ineligible to participate in the program.
