Registration of CPAs, Other Paid Tax Preparers to Start in 2011

The IRS recently provided additional details and a timetable for its proposed requirements for registration of all paid, signing tax return preparers including CPAs. The target date for starting implementation of the registration requirement is September 2010. Preparers who don’t already have one will need to obtain a Preparer Tax Identification Number (PTIN) that they must include on any return they are required to sign. Preparers will be required to renew their registration every three years. Note that this registration requirement applies to all preparers, including CPAs, attorneys and enrolled agents (“enrolled preparers”). Note, too, that registration is not limited to preparers of income tax returns. Paid, signing preparers of payroll and other non-1040 series returns are covered as well. Preparers in California, Oregon, Maryland and New York, which already have similar requirements, will still be required to register with the IRS.

Other new requirements—testing, criminal background checks and continuing professional education (CPE)—will not apply to CPAs, attorneys or enrolled agents. However, CPAs who keep their license current but are considered inactive will be subject to testing. In a Feb. 2 release of frequently asked questions, the IRS indicated that employees of a business who prepare the business’s tax returns won’t be affected by the requirements.

Two exams will be offered. The first will cover wage and nonbusiness income Form 1040 returns. The other will cover wage and small business income Form 1040 returns. No one otherwise subject to the testing requirement will be “grandfathered” out of it based on experience in tax preparation. Preparers will have three years from the implementation of the testing requirement to pass the required examination(s). They may take the test as often as it is offered, provided the applicable fee is paid for each attempt. Unenrolled preparers must complete 15 hours of CPE each year (the IRS is proposing three hours of CPE on federal tax updates, two on ethics, and 10 on general federal tax topics). Additionally, the IRS is requiring all signing and nonsigning tax return preparers to comply with the standard of conduct/ethics standards in Treasury Department Circular 230.

The IRS plans to establish a public database of return preparers, but as of this writing had not yet indicated how it might distinguish the qualifications of CPAs and other enrolled preparers from those of unenrolled preparers.

For more, see IRS Return Preparer Review. Also, see “AICPA Positions on Recent IRS Proposals,” page 30.

—By Gregory Carnes, CPA, Ph.D.,(gacarnes@una.edu) Raburn Eminent Scholar of Accounting, and Kelly Richardson (klrichardson1@una.edu), graduate student, both of the University of North Alabama, Florence, Ala.