IRS announces topics for tax return preparer test

The Internal Revenue Service (IRS) has released the specifications for the competency test individuals must pass to become a Registered Tax Return Preparer.

The test is part of an ongoing effort by the IRS to enhance oversight of the tax preparation industry. Preparers who pass this test, a background check, and a tax compliance check as well as complete 15 hours of continuing education annually will have a new designation: Registered Tax Return Preparer.

The test will include 78 specific topics included in 7 major categories:

  1. Preliminary Work and Collection of Taxpayer Data
  2. Treatment of Income and Assets
  3. Deductions and Credits
  4. Other Taxes
  5. Completion of the Filing Process
  6. Practices and Procedures
  7. Ethics

The new specifications identify the major topics that will be covered by the test, which will be available starting this fall. Although individuals who already have a provisional preparer tax identification number (PTIN) from the IRS do not have to pass the exam until December 31, 2013, they may take the exam at any time once it is available.

The test will have approximately 120 questions in a combination of multiple choice and true or false format. Questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.

Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the test. The time limit for the test is expected to be between two and three hours. The test must be taken at one of the roughly 260 Prometric facilities nationwide.

Some reference materials will be available to individuals when they are taking the test. Prometric will provide individuals with Publication 17, Form 1040, and Form 1040 instructions as reference materials.

The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times preparers can take the test, but a candidate must pay the fee each time the test is taken. Individuals must pass the test only once.

Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, Certified Public Accountants, and Enrolled Agents (EAs) are exempt from this testing and the related continuing education requirements because of their more stringent professional testing and education requirements associated with their licenses. Also exempt from the new testing requirement are supervised employees of attorneys, CPAs, attorneys, or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare as well as individuals who prepare federal returns other than the Form 1040 series.

Approximately 730,000 return preparers registered and received PTINs in 2011. Approximately 62 percent do not have professional credentials. The IRS does not yet know how many preparers will fall into other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.

The IRS will notify those preparers who have a testing requirement and provide more details.

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