| -- End Ad Box ---> | | | | preparers to meet the competency testing |
| At present, any person may prepare a federal tax | | | | requirements no later than the initial required renewal |
| return for any other person for a fee. The IRS | | | | date for tax return preparer registration. Jan. 1, 2011, is |
| estimates that there are between 900,000 and 1.2 | | | | the current target date for requiring all paid signing |
| million paid tax return preparers currently. Attorneys | | | | preparers to be registered and to use a Preparer Tax |
| and Certified Public Accountants receive a state | | | | Identification Number (PTIN). The IRS does not plan to |
| license, while Enrolled Agents receive the privilege to | | | | institute testing until after registration and mandatory |
| practice directly from the federal government. Other | | | | PTIN usage is in place. |
| tax return preparers do not pass any competency | | | | Tax Preparer Continuing Professional Education |
| requirements before they prepare a federal tax return. | | | | Tax return preparers who are required to register |
| This last category of tax return preparer is not | | | | must complete fifteen hours of continuing professional |
| required to have any minimum education, knowledge, | | | | education (CPE) each year, including three hours of |
| training or skill before they prepare a tax return for a | | | | federal tax law updates, two hours of tax preparer |
| fee. Major changes are on the way. | | | | ethics and ten hours of federal tax law topics. Enrolled |
| Mandatory Tax Preparer Registration | | | | Agents, Attorneys, and Certified Public Accountants |
| Certain paid tax return preparers such as attorneys, | | | | are not required to complete the new CPE |
| certified public accountants or enrolled agents are | | | | requirements as they generally must complete |
| exempt from the new rules. Licensed Public | | | | continuing education requirements to retain their |
| Accountants (LPA) in Delaware, Illinois, Iowa, Kansas, | | | | professional credentials. |
| Michigan, Oregon, and South Carolina do not have the | | | | The Enrolled Agent Advantage |
| same rights as a Certified Public Accountant and must | | | | Unlike an enrolled agent, this new class of return |
| also pass the IRS return preparer examination and | | | | preparer may not sign documents for a taxpayer and |
| satisfy the CPE requirements for tax return preparers | | | | may only represent taxpayers in limited situations |
| to prepare any federal tax return for compensation | | | | before revenue agents and customer service |
| (unless the LPA is an attorney or enrolled agent). The | | | | representatives. An un-enrolled |
| IRS will require all non-exempt individuals who are | | | | preparerââ¬â¢s ability to practice |
| required to sign a federal tax return as a paid tax | | | | before the IRS is very limited. Generally, it is limited to |
| return preparer to register and obtain a preparer tax | | | | the examination function of the Service, and only with |
| identification number. The IRS will make tax return | | | | respect to a return he or she prepared. Consequently, |
| preparer registration effective for three-year periods | | | | an un-enrolled preparer cannot practice before |
| and require tax return preparers to renew their | | | | appeals officers, revenue officers, and counsel. In |
| registration and certify continuing education every at | | | | addition, an un-enrolled preparer cannot execute claims |
| each renewal. | | | | for refund, receive refund checks, execute consents |
| The IRS Exam | | | | to extend the statutory period for assessment or |
| The IRS will institute competency testing and will | | | | collection, execute closing agreements, or execute |
| perform suitability checks on those paid tax return | | | | waivers of restriction on assessment or collection of a |
| preparers. Suitability checks often include criminal | | | | deficiency in tax. If you plan to prepare returns, the |
| background checks and tax compliance checks. A tax | | | | enrolled agent designation can open new opportunities |
| compliance check is a review of the | | | | for your practice and expand your capability to assist |
| preparerââ¬â¢s personal filing and | | | | more taxpayers. An enrolledagent is the only |
| payment history. There is no | | | | professional granted a right to practice directly from |
| from the testing requirements based on experience. | | | | the U.S. government. An enrolled agent may represent |
| Initially, the IRS will offer two competency examinations | | | | any taxpayer in any state regarding all matters before |
| for Form 1040 returns. The first examination will cover | | | | the IRS. |
| wage and nonbusiness income, while another | | | | Why Representation Matters |
| examination will additionally cover small business | | | | While more taxpayers are turning to software to help |
| income (Schedule C). IRS plans call for a third test to | | | | them prepare returns, a program does not exist that |
| address the competency of the tax return preparer | | | | can represent them during an audit. According to |
| with regard to more complex business tax rules once | | | | enforcement results published by the IRS in 2009, |
| the initial three-year implementation phase is complete. | | | | examinations of individual returns increased over 100% |
| The IRS is developing transition rules to avoid the | | | | since year 2000. Throughout this period, the number of |
| interruption of services to taxpayers during the initial | | | | examinations rose every year through 2009. |
| testing period. The current approach requires paid | | | | |