Three Strikes for the RTRP Regulations?

In baseball it is three strikes and you are out, but what about lawsuits? Three individuals sued the IRS to stop them from implementing their new regulatory scheme for registered tax return preparers (RTRP). Following is the course of events.

January 18, 2013 – As the result of the lawsuit, Federal District Judge James E. Boasberg issued an injunction preventing the IRS from enforcing its new Registered Tax Return Preparer regulations. (Strike 1) The IRS then filed a motion to stay the injunction.


February 1, 2013 – Judge Boasberg denied the IRS’s motion to stay. (Strike 2) The court also went on to clarify the requirements of the injunction and to emphasize that the PTIN (preparer tax identification number) program was specifically authorized by Congress and therefore not covered by the judge’s ruling.


March 27, 2013 – The District of Columbia Circuit Court of Appeals denied the IRS’s request to suspend the January 18th injunction. (Strike 3) A three judge panel upheld Judge Boasberg’s refusal to lift the injunction against the IRS. The court found that the IRS had not satisfied the strict requirements for a stay pending appeal.


The next major step will be a merits briefing which will conclude with oral arguments before a three-judge panel of the District of Columbia Circuit Court of Appeals.


Judge Boasberg did clarify that tax preparers could take competency tests and continuing education courses but only on a voluntary basis while his injunction remained in place.


Has the IRS struck out with its RTRP regulations? Probably not, but it may take an act of Congress to accomplish their goal of licensing all tax return preparers who are not EAs, CPAs, or Attorneys.


What do you think?



RTRP Program Suspended - Answers to Your Questions

As you are probably aware, on January 18, the U.S. District Court for the District of Columbia issued a permanent injunction preventing the IRS from enforcing the RTRP regulations. On Wednesday January 23, the Justice Department, on behalf of the IRS, filed a motion to suspend the injunction pending resolution of the appeal that the IRS intends to file. On January 28, the Plaintiffs filed opposition to the IRS motion to suspend the injunction.

With all of these injunctions, motions, and oppositions you probably have questions about your participation in the RTRP program. Here are answers to some of those questions.


Will I still have to take the RTRP test? – No. At this time the RTRP test is no longer required. As such, the test is no longer offered by Prometrics. However, the Department of Justice, on behalf of the IRS, has filed a motion to suspend the judge’s ruling pending the IRS’s appeal. Stay tuned. The test may be reinstated in the future.


Will I still have to complete 15 hours of continuing education (CE)? – The answer is no, unless you are an EA, CPA or attorney. However, if you prepare individual federal income tax returns, in my opinion, it is in your and your client’s best interest to learn about the new tax laws and regulations affecting 2012 filings. CE is not currently mandatory for RTRPs, and any option to proceed with registering for or participating in a CE program is strictly voluntary.


Do I have to renew my PTIN to prepare tax returns for 2012? – We don’t know at this time. However, the IRS posted the following message on their Facebook page on January 29:


Currently we are working diligently to resolve issues surrounding the issuance of Preparer Tax Identification Numbers (PTINs) for the filing season. Additional information will be provided shortly as to how to obtain PTINs.


May I schedule a date to take the RTRP test? – No. The Federal Judge’s ruling has effectively closed the RTRP testing and registration process for the time being.


I am scheduled to take the RTRP test later this year, can I still take the exam? – No, not at this time. The Prometric testing system for RTRPs has been suspended until further notice. They have indicated that you will be notified when additional information is available.


I have already received my RTRP certificate. Can I continue to use the RTRP designation? – The future of the RTRP designation is currently unclear; however, I have seen nothing that would indicate you could not continue to use the RTRP designation if you have passed the exam and received your certificate.

Can I take the RTRP test prep course for CE? – Currently the judge’s order makes continuing education voluntary, but no CE will be awarded.


I expect that if the IRS does not win their appeal, Congress will pass legislation giving them the power to regulate unlicensed tax preparers…but when that might occur is anyone’s guess. What do you think?

Here Comes the Judge: New Ruling for Registered Tax Return Preparers

On Friday January 18, 2013, Judge James E. Boasberg of the United States District Court for the District of Columbia struck down the IRS’s Registered Tax Return Preparers (RTRP) program and enjoined the IRS from enforcing the regulations.

The Court’s Decision

• Boasberg ruled against the IRS and in favor of the unenrolled tax preparers. The ruling eliminates the requirement for unenrolled tax return preparers to pass the RTRP examination or to obtain 15 hours of continuing professional education each year in order to prepare income tax returns for pay.
• The ruling states that tax return preparers are not “representatives who practice before the IRS.” The court equated “practice” with advising and assisting taxpayers in presenting their cases before the IRS, and filing a tax return would not be described as “presenting a case.”
• The ruling also granted permanent injunctive relief, enjoining the IRS from enforcing its regulation scheme against unenrolled tax preparers.

Options for the IRS

The IRS has the following options:
• Abandon any further attempts to regulate unenrolled tax preparers.
• Appeal the judge’s ruling.
• Seek congressional statutory authority to regulate RTRPs.

Options for the Unenrolled Tax Preparer

RTRP’s have the following options:
• Go about business as usual with no need to pass the RTRP exam or obtain the required continuing education.
• Continue to comply with the RTRP regulations voluntarily.
• Become an Enrolled Agent.

The court ruling striking down the RTRP regulations does not have any effect on the IRS’s Preparer Tax Identification Number (PTIN) requirements. All paid tax return preparers will still have to obtain their PTIN each year.
If you plan to, or have already become an RTRP, I would recommend that you voluntarily take the 15 hours of continuing education each year. If the IRS does obtain the authority to regulate unenrolled tax preparers (which I believe is the likely outcome), you will be ready and up-to-date on the latest tax laws.

Here at Thomson Reuters, we have created courses, webinars, and a subscription package designed specifically to meet RTRP regulations. Regardless of the outcome of this ruling, we are happy to have developed products that are customized specifically for tax return preparers who need clear and succinct update training to meet the needs of their clients each tax season.

I think the IRS will probably seek congressional statutory authority to regulate RTRPs; however, with Congress’s lack of ability to pass any meaningful legislation it may take a very long time. What do you think?

RTRP Solutions from Checkpoint Learning and Quickfinder

Robin Thompson, Shari Phelps, and Pam Schieffer provide a quick look at how Checkpoint Learning and Quickfinder have teamed up to provide tax reference and continuing education designed specifically for the new Registered Tax Return Preparer designation. Quickfinder offers quick reference handbooks in multiple formats (including on iPad and Android tablets) that include helpful information that RTRPs need to know specific to their new designation requirements. Checkpoint Learning provides an online CPE course package with CPE tracking designed for RTRPs, and a Quickfinder-branded downloadable trio of print-based self-study courses (with online grading) that exactly meet the annual continuing education requirements for RTRPs. Big savings are available with either option; take a look to learn more.

For more information, please see:
http://cl.thomsonreuters.com/CPESolutions/RTRP
and
http://www.quickfinder.com/tax_products/tax_preparation/1040-reg-tax-return-p...

Quickfinder and Checkpoint Learning are part of the Tax & Accounting business of Thomson Reuters.

RTRP Courses and CPE Tracking from Checkpoint Learning: A Video Update

Judy Young, Ken Koskay and Winford Paschall talk about the Registered Tax Return Preparer (RTRP) requirements and testing process, and new offerings from Checkpoint Learning. New CPE courses in multiple formats (webinar, online, self-study with online grading, live seminar) are available to prep for the IRS exam and to meet annual CPE requirements, and Checkpoint Learning's CPE compliance tracking for RTRPs provides e-alerts, automatic CPE certificate submission to the IRS, and more.

Find out more at http://cl.thomsonreuters.com/CPESolutions/TaxPreparers

Frequently Asked Questions About RTRP

Now that tax season is behind us and that last extension has been dropped in the mail it’s time to think about whether you or some of your staff need to take the new Registered Tax Return Preparers (RTRP) test. The test has been available since last November but the IRS and others recommended that you wait to take the test until after tax season. Following are some of the most frequently asked questions about the Registered Tax Return Preparer test.

1. What does the new IRS return preparer oversight program require?
The oversight program requires all paid tax return preparers to register with the IRS each year and have a Preparer Tax Identification Number (PTIN). Certain tax return preparers who prepare Form 1040 series returns must also pass a one-time competency test, a tax compliance check, and a suitability check.

2. Who must take the RTRP competency test?
All paid tax return preparers who prepare Form 1040 series returns, and are not CPAs, Attorneys, or Enrolled Agents, are required to take the test.

3. Can I take the test even if I’m not required to?
Yes. However, you must have a PTIN if you wish to take the test.

4. Is the test available in Spanish?
No. The test is currently available in English only and generally will be administered in a computer based-format.

5. How many questions are on the test and what is the minimum passing grade?
There are 120 questions in a combination of multiple choice and true or false formats. You will have two and a half hours to complete the test. A perfect score is 500 but you must score 350 (70%) or higher to pass the test.

6. Where do I go to take the test and is there a fee?
The test is administered by Prometric and can be taken at any one of its more than 260 sites throughout the U.S. The test fee is $116 and must be paid each time you take the test.

7. By what date must I pass the test?
Preparers must pass the competency test and a tax compliance chech by December 31, 2013.

8. Do I have to pass the test more than once?
No. Passing the test is a onetime requirement to become a RTRP.

9. Must RTRPs comply with any annual requirements?
Yes. Starting in 2012 you must complete 15 hours of continuing education each calendar year. The 15 hours must include two hours of ethics. three hours of federal tax law updates, and 10 hours of other federal tax law courses. These courses must be taken from an IRS-approved vendor.

10. Where can I find more general test information?
For more information on the testing requirements go to:
http://www.irs.gov/taxpros/article/0,,id=239683,00.html

RTRPs representation rights are limited to representation before certain IRS officers and employees and only in connection with returns they signed.

If you’re looking for an IRS-approved CE vendor with RTRP prep courses to help you pass the test and all the continuing education courses needed to stay current with the latest changes in federal tax law and fulfill the ethics requirement, then visit Checkpoint Learning.

RTRP Rules Challenged

The Arlington, Virginia-based Institute for Justice, on behalf of a couple of tax preparers, is challenging the Internal Revenue Service’s authority to regulate tax return preparers. The Institute plans to sue the IRS asking for an injunction against enforcement of the new Register Tax Return Preparer (RTRP) regulations. They claim that requiring tax preparers, who are not CPAs, Attorneys or Enrolled Agents, to pass a licensing examination (there is a fee of $116 to take the exam) and attend 15 hours of continuing education courses annually, will deprive them of their right to earn a living.

Well, I can tell you from personal experience: some of them need to be deprived.

When I was growing up, my dad was a struggling small business owner. He was one of those individuals who used an unregulated tax preparer. One year, the errors the preparer made on his return were so egregious that the IRS audited the return. Because of the nature of the errors, the agent went back and audited all open years. As a result my dad received a refund of over $1,000, which was a lot of money back in the 1960s, especially for someone like my dad who had struggled each year to pay those taxes.

There are three ways the group says these new regulations will negatively impact tax preparers and their clients:

1. It will put some tax return preparers out of business.

2. It could cause a financial hardship for their lower income clients resulting from the increased fees.

3. Their clients may have to find a new tax preparer.

My responses to the group’s allegations are as follows:

1. So be it. If they can’t pass a basic competency test they should not be preparing tax returns.

2. I don’t buy this. There are half a dozen or so entities that provide free tax return preparation, including the IRS’s Volunteer Income Tax Assistance (VITA) program. I realize that the free tax return preparation programs are primarily for the most basic tax returns, but if a return is more complex than a basic return you need the services of a qualified tax preparer. (See response 1 above.)

3. If they were using a qualified tax return preparer in the first place this would be a moot point, otherwise: See response 1 above.

What do you think?

RTRP Test Validation Concluded

The Internal Revenue Service has just announced that it has begun providing test results to tax return preparers who have taken the new return preparer competency test. Those who pass the test and a tax compliance check will be given a new designation: Registered Tax Return Preparer (RTRP).

Testing began in November 2011 and has been in a calibration phase since that time as the IRS validated the test questions and established the passing grade. The calibration phase has now ended. The test has a total of 120-question. A perfect score is 500. Preparers must score at least 350 (70%) in order to pass the exam. The test is part of a larger IRS effort to ensure competency and professional standards in the tax preparation industry. All RTRPs must also complete 15 hours of continuing education annually.

Although preparers have nearly two years to take the test (must pass the exam by December 31, 2013), the IRS encourages them to complete the requirement as soon as they can. Preparers with a testing requirement can schedule the test by accessing their PTIN account at IRS.gov/ptin. The test can be taken at more than 260 sites for a fee of $116. However, the IRS has announced that testing will be suspended for a two-week period beginning April 1 and resume on April 16, 2012. You can find more details about the test at IRS.gov/taxpros/tests.

If you're planning to take the test, check out the Registered Tax Return Preparers Competency Examination Prep Course from Gear Up, a one-day, comprehensive instructor-led course designed to provide you with the training you will need to pass the exam. Currently available this May or June in Arizona, California, Florida, Illinois, Oregon, and New Jersey; click to view more information or call 800.231.1860.

Top 10 Ways to Manage Tax Season Stress

Tax season for me was always like a marathon, beginning in mid February and crossing the finish line on April 15. It was long hours, lots of coffee, and plenty of stress. I remember working late nights as the deadline approached and then around 10:00 p.m. on April 15 the managing partner would gather up all of the extensions for those returns we just didn’t have time to complete and made a mad dash for the local post office. So following is my top ten list of ways to reduce or at least manage your tax season stress.

1. Get rid of bad clients. Fire those clients that are not profitable, never have their information to you on time and usually cause you the most stress. We all have them, so do it now before tax season begins.

2. Organize your office. Having a disorganized workspace will only add to your stress, especially when a client calls and you can’t quickly find his or her file.

3. Hire a personal assistant. Having someone who can run errands for you will significantly reduce your stress.

4. Exercise and eat right. You will find that if you eat three healthy meals a day and exercise regularly you will reduce your stress and actually be more productive. But you have to do it consistently.

5. Get to the office early. Come in to the office thirty minutes to an hour before regular office hours. Use this time to get your day organized, respond to e-mail or do research while the office is quiet.

6. Take short breaks. Meditate for five or ten minutes, stand up, do a few exercises or take a walk around the block and just relax. Don’t think about work.

7. Prioritize your tasks. Time consuming but relatively unimportant tasks can consume a lot of your day. Focus on those returns that you can’t delegate to a junior staff person. Don’t jump from one return to another. Try to finish one before you start the next.

8. Set client deadlines. Manage your clients don’t let them manage you. Work on the returns of those clients who meet their deadlines. If the client doesn’t have their data to you when requested, file an extension. Don’t work till midnight to complete the return for a client who did not get his or her information to you when requested.

9. Finish before the deadline. Schedule your clients so that you have time to complete their returns a day or two before April 15. This is a built-in cushion for any unexpected problems and should reduce your level of stress created from last minute crises.

10. Make April 16 and/or April 15 an official holiday. A firm I once worked for made April 16 an official firm holiday. I always looked forward to that holiday as a chance to unwind and think about nothing relating to work.

So, put your running shoes on, see which of these suggestions you can use to reduce your stress level, and look forward to a less stressful tax season.

February—For a Short Month, It Certainly Seems Long

Congress passed legislation that extends the 2% employee payroll tax cut for another 10 months without significant tax offsets. As you may recall, the 2-percentage point cut was slated to expire on March 1, 2012. The bill also extends federal unemployment insurance benefits and prevents a scheduled cut in payments to Medicare providers from occurring during the remainder of 2012. The President signed the payroll tax cut bill on February 22. Last week, the President submitted his Fiscal Year 2013 budget and revenue proposals. It will be interesting to see what happens to these proposals as they work their way through Congress.

Since it is an election year, it is sometimes difficult to predict how Congress will react to proposals from the White House. In contrast to the rancor and political skirmishes that occurred on Capitol Hill in 2011 when Congress debated raising the federal debt ceiling limit and when Congress extended the 2% payroll tax cut for two months at the end of December 2011, last week seemed relatively calm inside the Beltway. For a couple of days, I thought that there was a big snow storm on the East Coast and that the Washington had shut down due to wintry weather. Instead, members of both parties decided to work towards a common goal—their re-election.

Although it is an election year, most individual taxpayers are more concerned about the filing deadline for their Form 1040. By now, taxpayers have received most of their 1099 forms. Some of us have also had the privilege of receiving a 1099 in their mailbox and an email later that same day from the payer indicating that an amended 1099 is going to be issued by the end of February. One point for the procrastinators who do not file their tax returns too quickly.

The full brunt of the busy season has arrived. Luckily, there was not a lot of major tax legislation in 2011. This is unlike the previous tax season where tax legislation was passed into law during a lame duck session of Congress in late 2010. The final 2010 federal tax forms were released later than normal as a result of that last minute legislation. The companies that produce tax preparation software are probably breathing much easier this year. If I were a betting man, I would say that they will not be so lucky next year.

Speaking of tax form changes, some taxpayers have probably noticed line 1a, Merchant Card and Third-party Payments, in Part I on Schedule C (Form 1040). For 2011, the IRS deferred the requirement to report gross receipts received via merchant cards (credit and debit cards) and third-party network payments on line 1a. Taxpayers are supposed to enter zero on line 1a for 2011 and report all gross receipts on line 1b, including any income reported to them on Form 1099-K. It will be interesting to see what legislative and regulatory changes will occur in this area before the 2012 federal tax returns are filed in 2013. As always, the lobbyists will be busy.

In addition to the line for merchant card and third-party payments, taxpayers may have noticed some changes to Schedule D (Form 1040) this year. In general, taxpayers reporting 2011 capital gains and losses will first report the gains and losses on the new Form 8949, Sales and Other Dispositions of Capital Assets. The totals from Form 8949 are then carried over to Schedule D. Once there, the taxpayer will be on more familiar ground.

While preparing their Form 1040, some taxpayers may notice that the Making Work Pay credit has disappeared. This credit expired and cannot be claimed on the 2011 federal individual tax return. The 2% employee payroll tax cut might reduce the sting of no longer having the Making Work Pay credit, but most taxpayers would prefer having both benefits.

How do you keep up with these changes? For those individuals with Smartphones, the IRS recently announced the availability of their updated Smartphone application, IRS2Go 2.0. This is an expanded app designed to provide taxpayers with easier access to tools and information. The new app is available for both the Apple and Android platforms. It has a new YouTube feature, news feeds, and tax transcript service. You can also check the status of your refund using the app.

Last week, there was another item of interest from the IRS. The Service issued its annual “Dirty Dozen” ranking of tax scams. There were no big surprises. Number one on their list was identity theft, and number three was return preparer fraud. The Preparer Tax Identification Number (PTIN) requirement and Registered Tax Return Preparer (RTRP) program should help reduce return preparer fraud in the future. Many articles in the print and electronic media have started to educate taxpayers about seeking qualified tax preparers and asking for their PTIN.

One last item came to my attention this morning. There is a lot of talk in Washington about corporate tax reform. There is also some talk about individual tax reform in speeches by various presidential candidates. However, most tax professionals are currently concerned with filing 2011 tax returns. By April 17, many of us will have formed our own opinions on how to best reform the tax system, but the various tax provisions that expire at the end of 2012 will be foremost in our minds. It looks like the real fun begins when the lame duck session of Congress carefully deliberates how to handle that issue after the general election in November.

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?