The IRS this week issued final rules for its new Annual Filing Season Program, an initiative announced last Thursday that will enable paid tax return preparers to voluntarily fulfill agency-sanctioned continuing education requirements and obtain a record of completion.
The initiative is a Plan B of sorts for the IRS. Two court decisions – one in January 2013 and one last February – prevent the agency from mandating continuing education and competency testing of the roughly 60 percent of US tax return preparers who are not attorneys, CPAs, and enrolled agents (EAs).
The IRS is counting on Congress to pass legislation that would allow the agency to regulate all paid preparers.
“This voluntary program is not the ideal solution. But until legislation is enacted, we still have a responsibility to taxpayers and to our tax system to keep moving forward with our efforts to improve service to taxpayers,” IRS Commissioner John Koskinen said on June 26.
According to a new revenue procedure issued by the IRS on Monday, tax preparers with a valid Preparer Tax Identification Number (PTIN) are eligible to participate in the Annual Filing Season Program if they successfully complete a federal tax-filing season refresher course that is administered by an IRS-approved continuing education provider.
The refresher course must generally cover tax law and filing requirements relevant to Form 1040 series returns and schedules. At the completion of the six-hour course, applicants will be given a test with a minimum of 100 questions. To successfully complete the refresher course, applicants must correctly answer 70 percent of the questions.
Attorneys, CPAs, and EAs who are already covered by Circular 230 requirements would not be required to take the refresher course as a condition of eligibility to apply for a record of completion with the IRS. Also not required are:
- Individuals who passed the examination in the IRS’s previous Registered Tax Return Preparer (RTRP) program.
- Tax return preparers who are licensed or registered by any state, territory, or possession of the United States, including a commonwealth, or the District of Columbia after passing an examination covering federal tax matters.
- Tax return preparers who have passed an examination covering federal tax matters administered by an eligible entity recognized by the IRS.
Preparers must also voluntarily complete 18 hours of continuing education from an IRS-approved provider on the following topics:
- Two hours of ethics or professional responsibility.
- Six hours of federal tax law updates.
- Ten hours of federal tax law topics.
Preparers who successfully completed the tax-filing season refresher course would have satisfied the six-hour federal tax law update requirement, according to the revenue procedure.
The IRS noted that for the first year, a transition rule will be applied to prorate the required hours. For the 2015 filing season, a total of 11 hours would need to be earned in 2014, including the six-hour refresher course, three hours of federal tax law topics, and two hours of ethics.
Preparers who complete the continuing education requirements will receive a record of completion from the IRS. The record of completion is effective for only one calendar year. Once issued, it covers tax returns prepared and signed from either January 1 of the year covered by the record of completion or the date the record of completion is issued until December 31 of that year – whichever is later.
For example, the IRS stated “if an application is submitted on February 15, 2015, and a record of completion is issued on February 25, 2015, the preparer’s 2015 record of completion would be effective for tax returns and claims for refund prepared and signed from February 25, 2015, through December 31, 2015.”
Paid preparers who receive a record of completion from the IRS will be included in a database on the agency’s website. The database will be available by January 2015 to help taxpayers determine return preparer qualifications.
It will also contain information about practitioners – such as CPAs, attorneys, EAs, enrolled retirement plan agents (ERPAs), and enrolled actuaries registered with the IRS – who have recognized credentials and higher levels of qualification and practice rights.
The following are two key restrictions in the Annual Filing Season Program.
Solicitation restrictions: A tax return preparer who receives a record of completion may not use the term “certified,” “enrolled,” or “licensed” to describe this designation or in any way imply an employer/employee relationship with the IRS or make representations that the IRS has endorsed the tax return preparer.
However, tax preparers may represent that they hold a valid Annual Filing Season Program record of completion for that calendar year and have complied with the IRS requirements for receiving the designation.
Restrictions on eligibility: The following individuals are ineligible to participate in the voluntary preparer education initiative:
- An individual who is disbarred, suspended, or disqualified from practice before the IRS under Circular 230.
- An individual who has been convicted of a felony involving a financial matter, tax matter, or other violation of the public’s trust within the five-year period preceding the date of the application to participate in the Annual Filing Season Program.
- An individual who is enjoined from representing taxpayers before the IRS, preparing tax returns, or engaging in other conduct subject to injunction under Section 7407, for the time period during which the injunction is in effect.
- An individual who engaged in misconduct that would have violated Circular 230, including knowingly or participating in providing false or misleading information to the IRS.
- An individual who is not in compliance with his or her personal federal tax obligations (including employment taxes for which the applicant is personally liable).
- An individual who has his or her record of completion revoked.
- An individual who does not comply with the requirements of the revenue procedure.