IRS Announces New Tax Preparer Systems

by Mike Godfrey, Tax-News.com, Washington

23 August 2010

The United States Internal Revenue Service (IRS) has announced that a new online application system for compensated tax return preparers is expected to go live in mid-September.

In its announcement, the IRS proposes to require all individuals who receive compensation for preparing all or substantially all of a federal tax return or claim for refund after December 31, 2010, to have a Preparer Tax Identification Number (PTIN).

Under the proposed regulations, compensated tax return preparers will need to obtain, or reapply for, a PTIN and pay a user fee for utilizing this new comprehensive system, which is part of a series of steps planned to increase the oversight of federal tax return preparation. Tax return preparers will be creating PTIN accounts with the IRS when they use the new system.

“This is an important first step because it lays the groundwork in our efforts to ensure the quality and integrity of professional tax return preparation, which most taxpayers rely on in one form or another,” said IRS Commissioner, Doug Shulman.

Compensated tax return preparers would pay a USD64.25 annual user fee the first year for a PTIN based on two underlying costs. The IRS proposes to collect USD50 per user to pay for the technology, and compliance efforts associated with the new program, while the third-party vendor will receive USD14.25 per user to operate the online system and provide customer support.

Under the proposed regulations, the requirement to sign up on the new system will apply to all compensated tax return preparers of federal tax returns regardless of whether they currently possess a PTIN. Any individual who plans to prepare all or substantially all of a tax return for compensation must obtain a PTIN even if the individual is not subject to the testing and continuing education requirements that will be required.

Interested parties have until August 23, 2010, to submit comments on the regulations. The launch of the new online application system and proposed user fees are dependent on the publication of final regulations shortly thereafter.

In addition, the IRS has also released proposed regulations that would generally extend current regulations that apply to attorneys, certified public accountants and other specified tax professionals to all tax return preparers, including currently unenrolled tax return preparers.

The proposed regulations would, among other things, clarify the definition of practice, establish a new registered tax return preparer designation and the eligibility requirements for becoming a registered tax return preparer, re-propose standards with respect to the preparation of tax returns, and revise rules regarding continuing education providers.

Tax professionals and other interested parties have until October 7, 2010, to submit comments regarding these proposed regulations.

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