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PTINs for all: new IRS regs and proposals pick up speed.

The IRS is proposing a new set of tax preparer regulations that will change who will be allowed to prepare and file taxes. The first step in the process--expanding use of the preparer tax identification number (PTIN) system--opens registration this month. Proposed and final regulations are necessary for implementation of many of the other recommendations, and the IRS says further information will be available as the process continues.

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Background

The IRS launched a review of the oversight of federal tax return preparers in June 2009. The IRS then kicked off the 2010 tax season by issuing a report (www.calcpa.org/PreparerReviewReport) proposing new registration, testing and continuing education of paid tax return preparers. Some findings in the report:

* 98 percent of the individuals who offered comments on oversight and enforcement for paid tax return preparers favor increased efforts;

* 88 percent of the individuals who expressed an opinion on registering paid tax return preparers favor registration;

* 90 percent of the individuals who commented on education and testing favor minimum education or testing requirements for paid tax return preparers;

* 98 percent of the individuals who commented on quality and ethics favor establishment of quality and ethics standards for paid tax return preparers;

* 99 percent of the individuals who provided comments on outreach and communication for paid tax return preparers favor increased efforts.

Upcoming Requirements

* All paid tax return preparers must register with the IRS, pay a registration fee and obtain a preparer tax identification number. If you already have a PTIN, you must still register under the new process.

* Competency tests for all paid tax return preparers except CPAs, attorneys and enrolled agents who are active and in good standing with their respective licensing agencies.

* Continuing professional education of 15 hours per year for all paid tax return preparers except CPAs, attorneys and enrolled agents.

* Tax compliance checks on all tax return preparers.

* Extending Circular 230 ethics standards to all preparers.

Please note: According to the IRS, many preparers do not clearly understand that if they prepare even one return after Dec. 31, 2010, for which they are paid, they will fall under the PTIN requirements. All paid tax return preparers who prepare all or substantially all of any tax return (individual, partnership, corporate, payroll, estate, excise, etc.) or claim for refund to sign up with the IRS, will be required to pay a user fee and obtain a PTIN. These preparers will be subject to a tax compliance check to ensure they have filed federal personal, employment and business tax returns; and that the tax due on those returns has been paid or proper payment arrangements have been made.

Three Steps to Becoming a Registered Tax Return Preparer

Step One: Sign Up Electronically Federal tax return preparers may begin signing up for a PTIN in early September 2010. All tax return preparers--including CPAs, attorneys and enrolled agents--must have PTINs if they prepare tax returns after Dec. 31, 2010.

The PTIN fee, which is being-reconsidered from its initial proposed amount, is estimated to be in the range of $50-$100 annually per individual.

Everyone must pay the fee and sign up for a PTIN using the new process, including those preparers who already have PTINs. Tax return preparers who already have PTINs will be assigned the same PTIN under the new system.

Instructions for foreign tax return preparers are in development and will be available before tax return preparers will be required to obtain a PTIN.

Step Two: Competency Exam

CPAs, attorneys and enrolled agents will be exempt from the competency test requirement. Enrolled actuaries and enrolled retirement plan agents will be exempt from the competency test requirement if they only prepare returns within the limited practice areas of these groups. More guidance on testing will be available in spring 2011, including the amount of the testing fee.

Beginning in mid-2011, tax return preparers must pass a competency test to officially become a registered tax return preparer. Tax return preparers who have PTINs before testing becomes available will have until Dec. 31, 2013, to pass the competency test. After testing becomes available, new tax return preparers will be required to pass the competency test before they can obtain a PTIN.

Step Three: Continuing Education

A new continuing education requirement of 15 hours per year will also be implemented in the future. This will not apply to attorneys. CTAs. enrolled agents, enrolled actuaries or enrolled retirement plan agents due to their existing education requirements.

The beginning date has not been determined. Courses will need to include three hours of federal tax law updates, two hours of ethics and 10 hours of other federal tax law.

New e-file Mandate

Beginning Jan. 1, 2011, many tax return preparers will be required to file tax returns electronically:

* Tax preparers who prepare 100 or more individual or trust returns in 2011 will be required to e-file.

* Tax preparers who prepare 11 or more individual or trust returns in 2012 will be required to e-file.

Ethics Standards Expanded

Also beginning Jan. 1, 2011, all tax return preparers must comply with Treasury Department Circular 230.

Please note: As part of the new PTIN requirements, the IRS will verify if tax return preparers are compliant with their personal and business tax obligations. The IRS encourages all tax return preparers to resolve any outstanding issues prior to registering for a PTIN under the new requirements.

Information courtesy of the IRS.

target Implementation Timeline

Sept. 1, 2010: PTIN registration begins.

June 1, 2011: Testing available.

Sept. 1, 2011: PTIN renewals begin.

Dec. 31, 2013: PTIN revoked if competency test not passed.

Jan. 31, 2014: Searchable database available.

need more help?

* Frequently Asked Questions about the Proposed New Requirements for Tax Return Preparers: www.calcpa.org/PTINfaqs.

* Furnishing Identifying Number of Tax Return Preparer: www.calcpa.org/REG-134235-08

* IRS Return Preparer Regulations homepage: www.calcpa.org/NewReqHomepage
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Title Annotation:FedTax; preparer tax identification number
Publication:California CPA
Geographic Code:1USA
Date:Sep 1, 2010
Words:977
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