Circular 230 Rides Again

This week the IRS proposed amendments to Circular 230 to help regulate tax return preparers by making all return preparers subject to the circular’s requirements. The proposed amendments would do the following:

· Define “Practice before the Internal Revenue Service” to clarify that either preparing a document or filing a document may constitute practice before the IRS.
· Establish a new “Registered Tax Return Preparer” designation. (They will probably become RTRP’s don’t you think?)
· Define eligibility to become a Registered Tax Return Preparer. (The regulation of unregistered tax preparers currently being proposed by the IRS.)
· Amend the rules regarding continuing education providers.
· Establish standards for the preparation of tax returns.
· Make RTRPs subject to the solicitation, incompetence and disreputable conduct sections of the circular.

The service also announced that they will stop issuing PTINs effective August 22nd. If you apply for a PTIN before August 22nd. you will have to reapply once the new comprehensive PTIN system is in place. Won’t everyone have to reapply?

The AICPA says that it supports the general goals of improving compliance and raising ethical conduct but has serious concerns with a number of implementation steps (See Journal of Accountancy, “IRS Moves Forward With Preparer Registration Plan,” August 19, 2010). Is requiring compliance with Circular 230 a good plan that will improve tax compliance and ethical standards or is it just more government red tape? What do you think?