In its game-changing fifty-plus page report released in December 2009, the Internal Revenue Service announced that all unlicensed paid return preparers will be required to pass competency testing, abide by a code of ethics, and complete 15 hours of annual continuing education.
And, starting next filing season, anyone who is paid to file a federal tax return must be registered with the IRS and must both sign and affix an IRS-issued identifier (commonly referred to as a PTIN) to each return.
"This requirement will allow the agency to track the accuracy of any given preparer, and to conduct compliance checks on return preparers before issuing or reissuing identification numbers", said Robert Kerr, National Association of Enrolled Agents (NAEA) senior director of government relations. "Tax practitioners who are licensed under Circular 230 - enrolled agents, certified public accountants, and tax attorneys - have already been tested, adhere to a code of ethics, and are required to complete annual continuing education. It's doubtful that much will change for them."
If you are a preparer who does not fall into the categories listed above, you might be wondering exactly what you'll have to do to be able to continue to prepare returns and when you need to do it. So far, the IRS has only launched the PTIN requirement, but a return preparer examination is currently being developed, and there is no way of predicting how difficult the test will be or what areas will be covered. For now, aside from registering for a PTIN, preparers can only wait for the next IRS instruction.
The Enrolled Agent option
Many return preparers who have been sitting on the fence for years about becoming an enrolled agent (EA) have decided that now is an excellent time to take the plunge. EAs already are regulated by IRS and have a firm reputation for professional excellence and high ethical standards. Instead of simply completing the requirements for the lowest level of registration, many tax preparers are opting for the increase in both prestige and fees that comes with earning the EA license, according to the NAEA.
EAs have the competitive advantage of being part of an elite group of recognized tax experts. No college degree is required - only plenty of tax knowledge. The only federally-licensed tax practitioners, EAs are empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of IRS for audits, collections, and appeals. Only enrolled agents, attorneys, and CPAs may do so. Unlike the others, however, EAs receive their right to practice directly from the U.S. government and not from the state. Because of this difference, EAs are not limited to representing only clients who claim residence in the state in which they operate their practices.
The Special Enrollment Exam
Candidates for the enrolled agent license must pass a three-part examination known as the Special Enrollment Exam (the SEE, for short). The three areas tested are individual returns, business returns, and representation before the IRS. If the idea of taking the test is somewhat daunting to you, you may want to take a prep course on one or all of the test sections. NAEA, the professional association that represents enrolled agents, provides a listing of resources, including its own in-depth preparation for the exam in an online facilitator-led course.
Experienced tax preparers might instead be interested in the in-person SEE review course NAEA is offering at its 2010 National Conference, August 8-10. Attendees will cover all three sections of the SEE in just three days at the Mandalay Bay Hotel and Casino in Las Vegas.
Whatever path you decide to take to meet the new requirements, be aware that the IRS has pledged to enforce these standards vigorously, using registration data and other means to identify and sanction individuals who fail to comply. Hopefully, these changes will engender more trust and respect for tax professionals among the American public.
NAEA is the professional society that supports its nearly 12,000 members with resources, education, and networking, and by representing their interests to government, business, and the general public. Find out more about NAEA and becoming an enrolled agent at www.naea.org.