The IRS moved ahead with its program to register tax return preparers, as aspects of the plan drew concerns and recommendations from a wide range of practitioners and policymakers, including the AICPA. In late September, the IRS issued final regulations (TD 9501 and TD 9503) on preparer tax identification numbers (PTINs) and implemented a Web-based application form as well as a paper form, W-12. All preparers, including CPAs, must apply for and obtain a PTIN to prepare returns in 2011, even if they already have one. The application portal, FAQs and related materials are at tinyurl.com/lxpmah. The regulations adopt without significant change proposed regulations (REG-139343-08) requiring all paid tax return preparers to obtain and annually renew a PTIN and pay new user fees totaling $64.25. Earlier, the IRS issued proposed regulations (REG-138637-07) providing amendments to Circular 230.
The regulations advanced a plan first outlined in detail early in 2010 to register paid return preparers and require that all preparers adhere to Circular 230’s ethical standards. For those other than CPAs, attorneys and enrolled agents, an examination and continuing education would also be required. The new system is set to take effect for returns prepared beginning in 2011. See prior Tax Matters coverage, including “IRS to Register and Test Signing Preparers,” March 2010, page 58.
The newest proposed regulations would amend Circular 230 to clarify the definition of a tax practice; establish a new “registered tax return preparer” designation and define its eligibility requirements; set tax return preparation standards; and amend the current rules covering CPE providers.
The proposed regulations outline a registered tax return preparer’s limited rights to practice before the IRS. Generally, registered tax return preparers would be limited to preparing tax returns, claims for refunds and other documents for submission to the IRS. Registered tax return preparers would not be permitted to represent taxpayers before the IRS except during an examination of a return or claim for refund that the registered tax return preparer had signed. The current limited practice authorization under Circular 230 § 10.7(c) would be removed.
Also, under the proposed regulations, only preparers who are registered and have obtained a preparer tax identification number (PTIN) could prepare, or assist in preparing, all, or substantially all, of a tax return or claim for refund, or sign a tax return or claim for refund, including CPAs, attorneys and enrolled agents. The proposed regulations would also make “registered tax return preparers” subject to Circular 230’s rules regarding solicitation, incompetence and disreputable conduct and its procedures to ensure compliance.
To become a “registered tax return preparer,” an individual will have to pass a minimum competency examination and possess a current PTIN. After passing the IRS-administered exam, “registered tax return preparers” will be subject to suitability checks. If they have engaged in conduct that could result in suspension or disbarment under Circular 230, they will not be eligible to become a “registered tax return preparer.” Individuals are not exempted from the competency examination based on any prior tax return preparation experience.
At an Aug. 24 hearing on the user fee proposed regulations, Edward Karl, AICPA vice president–Taxation, outlined some of the Institute’s concerns and asked the IRS to “slow down and get it right” regarding implementation of the new regulatory system. The IRS has included individuals who do not sign a tax return but prepare all or substantially all of a return for compensation in the PTIN mandate and other requirements including competency testing, background checks and continuing education. Such nonsigning preparers employed by CPA firms are trained and supervised by CPAs who are in turn regulated by states, Karl said. Many are CPA candidates and have completed extensive training. Four states that already regulate tax return preparers exempt not only CPAs from such requirements but also their employees when they prepare returns within the scope of their employment under the supervision of a CPA who signs the return, Karl said. He therefore reiterated the AICPA’s position that nonsigning preparers in CPA firms should be exempted from the IRS registration program. Karl also indicated that the AICPA believes the examination should be delayed in its entirety until the IRS undertakes a cost/benefit analysis to determine if it could substantially achieve its general goals with other aspects of the program, and with much less burden on the preparer community.
The AICPA has stated it supports the IRS’ general goals of enhancing compliance and elevating ethical conduct and has been actively involved in this issue since it was first raised by IRS Commissioner Doug Shulman last summer, working with policymakers, participating in many meetings and testifying at two public hearings on the proposal. The AICPA will submit written comments on the Circular 230 amendments and planned to testify at an Oct. 8 public hearing.
TD 9501, TD 9503 (9/30/2010)
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