Update on Tax Preparer Program

Summary of IRS Webinar on Tax Preparer Program on March 30, 2011

According to David Williams, IRS has issued or updated about 700,000 PTIN so far. What about the 300,000 or so who haven’t filed yet? IRS will be trying to educate, inform and locate the paid preparers.
 
How is the PTIN fee used? $64.25 is designed to fund the PTIN program, to promote the program, and to cover the costs of the due process rights – review rejected applications, appeals, court cases. A big part of the fee to ensure IRS gives everyone the due process rights – which can be expensive. The costs will be re-evaluated over the years, once everyone is registered and there will be fewer appeals from new registrants.
 
$14.25 is fee to vendor
$50.00 is for IRS costs – admin overhead (small component), educational and promotional costs and database of tax professionals – so the public can look that up. The vast majority of the $50 is to cover the compliance component – due process and tracking down ‘ghost’ preparers. IRS will be looking for patterns in self-prepared tax returns (like identical routing numbers or IP addresses) to track down paid preparers who do not sign the returns.
 
What is a Provisional PTIN? EAs, CPAs, and attorneys are already licensed by their professional organizations or IRS. Their PTINs are not provisional. The Provisional PTIN is for registered preparers who have not yet taken the exam. Once they pass the exam, their PTIN will be permanent.
 
Who needs a PTIN? You will need a PTIN if you prepare even ONE form 1040 for compensation.
 
Testing? There will only be one test – for preparers of Form 1040. The business exam is put on the back burner for now. The test will be open-book, to the extent that you can bring in some material – not a library of material. The exam will be computer-based, available at testing facilities all over the country, and perhaps some overseas locations. Yes there will accommodations for blind, or people with special needs. (Note: IRS employs blind people. They are very effective at their jobs, too.)
 
The exam is designed to be something that anyone who currently prepares tax returns should be able to pass. It’s designed to test if you know your way around a tax return. As an example, Mr. Williams talked about a question testing to see if you know what triggers Alternative Minimum Tax. (That instantly lets out lots of people.)
 
When will test be ready? IRS expects to assign the contract to a vendor in the next couple of weeks. Expects to develop the testing parameters over the summer - and have testing begin in the fall – perhaps September.
 
Preparers will be able to take the test as often as they like until they pass. There may be a waiting period after each failure. Mr. Williams is not sure.
 
Provisional PTIN holders will need to finish their testing by the end of 2013 or lose their PTINs and right to prepare paid returns.
 
Re-Testing: Preparers will only need to pass the test once. However, if they do not fulfill their CPE requirements and let their qualifications lapse, they will need to re-test.
 
Fee for the test? That was not discussed at all. But there will be one.
 
Who must test? There was a question from a retired CPA living overseas. Must he take the test? Essentially, yes. Either he is a CPA, or he is not. If he is no longer a CPA and is a paid preparer – he must take the test. What about VITA volunteers? They will have to take the test if they want to be paid preparers.
 
 
Test Preparation Tools: IRS will not provide them. They will come from private vendors. However, IRS has not yet communicated the guidelines to the vendors. We pray that will happen soon so we can help you.
 
IRS expects that there will not be a need for in-depth study, since the exam only covers the preparation of Form 1040. Have you seen how much goes into that Form 1040? I can easily spend over 100 hours teaching it, and barely scratch the surface. It would be nice to get guidelines to bring that course down to 8-16 hours.
 
CPE (continuing Professional Education): 15 hours, including 3 hours of tax updates and 2 hours of ethics. IRS will be allowing CPE credit for the exam preparation courses. However, IRS will not be allowing CPE credit for the VITA courses – even though the courses are developed by IRS. (I suspect once Mr. Williams takes a closer look at those materials, he will allow CPE for the volunteers.)
 
During the webinar, a survey was taken about where people get their CPE. An alarming percentage of people responded that they get it at the IRS Tax Forums. Why alarming? They are bursting at the seams now, and the corridors and classrooms are barely maneuverable with about 20,000 people. What will happen when 500,000 try to attend?
 
How will this affect your practice and your CPE?

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Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

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