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TAX MATTERS

Preparer fingerprinting delayed

 

February 2012

The IRS will delay and reconsider its fingerprinting requirement for tax return preparers, IRS Commissioner Doug Shulman told the AICPA National Tax Conference in November.

 

“We have decided to hold off fingerprinting while we consider issues that have been raised and have further discussions with interested parties,” Shulman said during his keynote address to the conference in Washington.

 

Shulman said the IRS would move forward with other aspects of its return preparer regulation plan, including competency testing and continuing education requirements for preparers who are not CPAs, attorneys or enrolled agents.

 

The IRS formally proposed the requirement in September in rules on fees for fingerprinting and the competency exam. (REG-116284-11). In hearings on the proposed regulations on Oct. 7, AICPA Tax Executive Committee Chair Patricia Thompson urged the IRS to eliminate the fingerprinting requirement because of its cost and burden, saying it duplicated hiring background checks used by some CPA firms. She also reiterated the AICPA’s position that CPAs should continue to be exempt from fingerprinting because of their regulation by state boards of accountancy. The AICPA’s concern with fingerprinting related to nonsigning staff working under the supervision of a CPA, and the Institute recommended an alternative background check involving consumer reporting agencies. Other preparer groups also objected, saying fingerprinting imposed an undue financial burden, especially since it would have to be done at a limited number of physical locations.

 

Shulman, in his speech, acknowledged these concerns. “While we all share the same goal of ensuring that there is adequate due diligence on people entering this field, the AICPA and others have made a number of important points that we need to think through regarding how best to do this,” he said.

 

Feedback from stakeholders including the AICPA has helped shape the registration regime in other ways, too, Shulman noted: by exempting nonsigning preparers supervised by a CPA, attorney or enrolled agent from testing and continuing education requirements; by requiring registered tax return preparers to include a disclaimer in their advertisements that they are not endorsed by the IRS; and by providing flexibility in the approval process for providers of continuing education materials under the program.

 

In a conference session, David Williams, director of the IRS Return Preparer Office, said the IRS had issued about 745,000 PTINs to date, of which 62% were to unenrolled preparers.

 

Shulman and Williams both said a priority going forward will be to identify “ghost preparers”—those who prepare returns for compensation but do not sign them and have not obtained a PTIN.

 

Later in November, the IRS finalized the fee rules for the competency exam only, saying it was considering alternatives to fingerprinting (T.D. 9559).

 

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