New IRS Requirements for Tax Return Preparers

In tax year 2010, the IRS started to implement new regulations for paid tax return preparers. The rules require all paid preparers to register with the IRS, pass testing, complete continuing education and e-file if filing more than 10 individual federal returns. A summary of the new requirements appears below.

The measures are intended to help protect taxpayers from incompetent and unethical preparers, promote greater tax law compliance and increase confidence in the tax system.

The IRS is implementing the registration, testing and continuing education changes over a 3-year period, with a shorter phase-in period for e-filing. Many details regarding implementation and timeline are yet to be determined. TaxACT will update this page as the IRS releases the information.

Summary of requirements

• Registration and PTIN. All paid tax return preparers were required to register with the IRS, pay a registration fee, and obtain or renew their preparer tax identification number (PTIN) before January 1, 2011. Your PTIN is required on all returns or claims for refund filed after December 31, 2010. The initial application fee is $64.25. The annual renewal fee is $63. If you are initially denied a PTIN, the IRS may reconsider your application. *Obtain or renew your PTIN using the IRS' new registration system or by mailing W-12, IRS Paid Preparer Tax Identification Number Application. Receipt of a PTIN is immediate after successful online registration, while response time for mailed Forms W-12 is 4-6 weeks. Open renewal must be completed by December 31, 2011.
• Testing. All paid tax return preparers except attorneys, certified public accountants and enrolled agents must pass a competency exam. The IRS will create a searchable, public database of all preparers who have registered and passed the exam. Preparers who register before the exams are available will have until December 31, 2013, to pass, while new and unregistered preparers will be required to pass the test before registering and obtaining a PTIN. Testing is expected to begin in October 2011.
• Continuing education. Beginning in 2012, all paid tax return preparers except attorneys, CPAs and enrolled agents must complete 15 hours of continuing professional education per year, consisting of three hours of federal tax law updates, two hours of tax ethics and 10 hours of federal tax law. Courses must be taken from IRS-approved CE providers. Preparers will confirm completion during registration renewal.
• Follow up. The IRS has postponed the implementation of fingerprinting and background checks for individuals not subject to checks for their professional certifications for the 2011 tax season.
• Circular 230 ethics standards. Currently, only attorneys, CPAs and enrolled agents practice these rules. The standards will be extended to all preparers.
• E-filing. The Worker, Home ownership, and Business Assistance Act of 2009 included a federal e-filing mandate. In the 2011 tax year, preparers must e-file if filing more than 10 individual federal returns per calendar year. Reminder: In order to e-file, preparers must have an EFIN (Electronic Filing Identification Number).

Tax preparer's may not use the title "registered tax return preparer" until they have met all the conditions of becoming a registered tax return preparer, which includes passing of the competency exam and background checks.

What action should you take now?

1. Obtain or renew your PTIN before Dec. 31, 2011. The fastest way to obtain or renew your PTIN is using the online registration system. If you mail Form W-12, it will take approximately 4-6 weeks to receive your PTIN. For technical support related to the online registration system, call the IRS at 1-877-613-PTIN (7846).
2. Apply for an EFIN if you don't have one already. Either use the IRS' e-Services – Online Tools for Tax Professionals or mail Form 8633, Application to Participate in the IRS e-file Program. Learn more about becoming an authorized e-file provider.

   IRS video: How to become an authorized IRS e-file provider

3. Learn more about the requirements on the following IRS pages:
   • IRS Tax Information for Professionals
   • Review the new regulations for preparers
   • PTIN requirements
   • Frequently asked questions
   • IRS video: New Requirements for Federal Tax Return Preparers – Learn the Who, What, When and How
   • IRS Begins Enforcement of New Return Preparer Rules
   • IRS Releases Specifications for Registered Tax Return Preparer Test
   • IRS Notice 2011-80: Guidance Regarding Obtaining and Renewing PTINs and Continuing Education Requirements for Registered Tax Return Preparers
   • IRS Begins PTIN Renewals for 2012 Filing Season