IRS Finalizes Online Tax Preparer Registration

by Mike Godfrey, Tax-News.com, Washington

01 October 2010

As part of an initiative to ensure that tax return preparers are competent and qualified, the United States Internal Revenue Service (IRS) has issued final regulations requiring paid tax return preparers to register and obtain a Preparer Tax Identification Number (PTIN).

All paid tax return preparers who prepare all or substantially all of a tax return are required to use the new registration system to obtain a PTIN. Individuals who currently possess a PTIN will need to reapply under the new system, but generally will be reassigned the same number.

“Getting a new, industry-wide registration system in place is essential to our efforts to improve the standards and oversight of tax return preparation,” said IRS Commissioner, Doug Shulman. “This will create higher standards for the tax preparation community and ensure quality service for taxpayers.”

Applicants will pay a USD64.25 fee to obtain a PTIN, which will be valid for one year. As part of that fee, the IRS will receive USD50 per user to pay for the technology, compliance and outreach efforts associated with the new programme. A third-party vendor will receive USD14.25 per user to operate the online system and provide customer support.

The new online registration system and final regulations are part of a series of steps underway to increase oversight of federal tax return preparation. In January this year, Shulman announced the results of a comprehensive six-month review of the tax return preparer industry, which proposed new registration, testing and continuing education of federal tax return preparers.

With 60% of American households using a tax preparer to help them prepare and file their taxes, it is expected that higher standards for the tax return preparer community will significantly enhance protection and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long-term. Currently, many return preparers do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.

The start of the PTIN registration process begins as the IRS continues its review of the testing and education components of the return preparer initiative, as recently announced in proposed regulations. Those regulations announced that attorneys, certified public accountants and enrolled agents would not be subject to additional testing or continuing education requirements in order to obtain a PTIN as they are currently subject to strict professional standards of conduct and ethics.

Pending finalization of guidance, the IRS is considering extending similar treatment to those people who engage in return preparation under the supervision of someone else, for example, some employees who prepare all, or substantially all, of the return and work in certain professional firms under the supervision of one of the above individuals who signs the return.

The IRS will provide guidance defining this area in the coming months, and will continue to seek feedback during this process to help ensure the creation of a fair, equitable oversight system that minimizes burden.

On the continuing education requirements, the IRS recognizes the need to have transition rules in place, and plans to issue additional guidelines by the end of the year.

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