IRS Launches Competency Testing for Tax Return Preparers

 

The Internal Revenue Service has announced that it is ready to roll out its new competency test for tax return preparers. Test scheduling will begin the week of November 28.

 

The new exam is part of a massive program for regulating the tax preparation industry. For starters, the IRS has required all paid tax return preparers to obtain a Preparer Tax Identification Number (PTIN). After a PTIN has been obtained, tax return preparers who are required to take the new test have until December 31, 2013 to pass it. Certain preparers -- including CPAs, attorneys, and enrolled agents -- are exempt from the testing and other education requirements.

 

"This is another major step forward in our effort to enhance tax preparation service to millions of taxpayers. People should feel assured that the person they hire to prepare their federal tax returns has a working knowledge of the tax code," said IRS Commissioner Doug Shulman. "The majority of tax return preparers are reputable professionals, but the few bad apples cause great harm to taxpayers and the industry."

 

Once a tax return preparer has passed the test and satisfied the other requirements, he or she will be designated as a "Registered Tax Return Preparer." In order to maintain this designation, the preparer must renew the PTIN and complete 15 hours of continuing education each year.

 

More than 750,000 tax return preparers have already obtained their PTINs. The IRS estimates that approximately 350,000 individuals may be subject to the Registered Tax Return Preparer test requirement at this time.

 

The fee for taking the competency test is $116. This includes the IRS portion of the fee and a separate portion allocated to Prometric Inc.,  the third-party test vendor. The computer-based test covers Form 1040 and its accompanying schedules. Initially, test-takers won't receive their scores for two to six weeks so the IRS can validate the exam and determine the threshold for passing. By the middle of January, the IRS expects that tax return preparers will be able to receive their scores at the test center immediately following the exam.

 

Prometric will be administering the test at more than 260 centers nationwide, but the test isn't currently available at all locations. Test sites will be added on a daily basis and international locations may become available in the future.

 

You can read more details about the new competency test, including which preparers are required to take the exam and how to schedule an appointment, in IRS Fact Sheet 2011-12.