PTIN BEGINS & COMPETENCY IS COMING

Earlier this year the IRS announced their new tax preparer initiative (see my blog “Sign Me Up Boys” of May 6) that will require all paid tax preparers to obtain a Preparer Tax Identification Number (PTIN). Unenrolled tax preparers will also be required to pass a competency exam and take mandatory continuing professional education courses.

On September 28, the IRS launched the PTIN registration system component of its tax payer initiative program and provided further clarification of the unenrolled tax payer program. Here are some of the more significant items you should know.

New PTIN Requirements

1. All compensated tax return preparers or those assisting in preparing the return must obtain a PTIN.
2. All federal tax return preparers–even those who already have a PTIN–will need to register in the new system by December 31, 2010.
3. At least initially, non-signing preparers will not have to be disclosed on each return.
4. An employee of a business who prepares the business tax return as part of their job responsibilities will not be required to sign the return as a paid preparer or register and obtain a PTIN.
5. All paid tax return preparers are required to obtain a PTIN. This includes those who only prepare payroll or other non-1040 tax returns.
6. You must be at least 18 years of age to obtain a PTIN.
7. Individuals who prepare tax returns as a VITA volunteer are not required to have a PTIN.

Competency Testing

1. Those who pass the competency test will be called “registered tax return preparers.”
2. The test will only be available in English, initially.
3. The test will be open book. Certain resources will be permitted and provided by the testing center.
4. The passing percentage for the test still hasn’t been determined. You may take the test an unlimited number of times, but the fee will apply each time you take the course.
5. If you don’t pass the test by December 31, 2013, your PTIN will be deactivated and you can no longer prepare tax returns for compensation.
6. Testing is expected to begin by midyear 2011.
7. To take the test, you must physically go to the testing site.

Other Credentials

1. Accredited Council of Accountancy for Taxation (ACAT) credential holders must obtain a PTIN and pass the competency exam unless they are a CPA, attorney or enrolled agent.
2. Registered or Licensed Public Accountants (LPAs) that have the same rights and privileges as a certified public accountant will not be required to pass the competency exam or satisfy the CPE requirements. However, if they do not have the same rights and privileges as a certified public accountant, they will be required to pass the competency exam and satisfy the CPE requirements. (Check with your state regulator.)

For information on training to prepare you to pass the unenrolled tax preparers exam, go to the following website:

http://www.gearup.com/cart/BrowseByTopic.aspx?Code=10-s250

Is creating this fourth class of individuals who are approved to prepare federal tax returns good for taxpayers or the accounting profession? What do you think?