| 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 preparers currently. Attorneys and | | | | preparers to be registered and to use a Preparer Tax |
| Certified Public Accountants receive a state license, | | | | Identification Number (PTIN). The IRS does not plan to |
| while Enrolled Agents receive the privilege to practice | | | | institute testing until after registration and mandatory |
| directly from the federal government. Other tax return | | | | PTIN usage is in place. |
| preparers do not pass any competency requirements | | | | Tax Preparer Continuing Professional Education |
| before they prepare a federal tax return. This last | | | | Tax return preparers who are required to register |
| category of tax return preparer is not required to have | | | | must complete fifteen hours of continuing professional |
| any minimum education, knowledge, training or skill | | | | education (CPE) each year, including three hours of |
| before they prepare a tax return for a fee. Major | | | | federal tax law updates, two hours of tax preparer |
| 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 preparers such as attorneys, certified | | | | are not required to complete the new CPE |
| public accountants or enrolled agents are exempt from | | | | requirements as they generally must complete |
| the new rules. Licensed Public Accountants (LPA) in | | | | continuing education requirements to retain their |
| Delaware, Illinois, Iowa, Kansas, Michigan, Oregon, and | | | | professional credentials. |
| South Carolina do not have the same rights as a | | | | The Enrolled Agent Advantage |
| Certified Public Accountant and must also pass the | | | | Unlike an enrolled agent, this new class of return |
| IRS return preparer examination and satisfy the CPE | | | | preparer may not sign documents for a taxpayer and |
| requirements for tax return preparers to prepare any | | | | may only represent taxpayers in limited situations |
| federal tax return for compensation (unless the LPA is | | | | before revenue agents and customer service |
| an attorney or enrolled agent). The IRS will require all | | | | representatives. An un-enrolled preparer's ability to |
| non-exempt individuals who are required to sign a | | | | practice before the IRS is very limited. Generally, it is |
| federal tax return as a paid tax return preparer to | | | | limited to the examination function of the Service, and |
| register and obtain a preparer tax identification number. | | | | only with respect to a return he or she prepared. |
| The IRS will make tax return preparer registration | | | | Consequently, an un-enrolled preparer cannot practice |
| effective for three-year periods and require tax return | | | | before appeals officers, revenue officers, and counsel. |
| preparers to renew their registration and certify | | | | In addition, an un-enrolled preparer cannot execute |
| continuing education every at each renewal. | | | | claims for refund, receive refund checks, execute |
| The IRS Exam | | | | consents to extend the statutory period for |
| The IRS will institute competency testing and will | | | | assessment or collection, execute closing agreements, |
| perform suitability checks on those paid tax return | | | | or execute waivers of restriction on assessment or |
| preparers. Suitability checks often include criminal | | | | collection of a deficiency in tax. If you plan to prepare |
| background checks and tax compliance checks. A tax | | | | returns, the enrolled agent designation can open new |
| compliance check is a review of the preparer's | | | | opportunities for your practice and expand your |
| personal filing and payment history. There is no | | | | capability to assist more taxpayers. An enrolled agent |
| "grandfathering" from the testing requirements based | | | | is the only professional granted a right to practice |
| on experience. | | | | directly from the U.S. government. An enrolled agent |
| Initially, the IRS will offer two competency examinations | | | | may represent any taxpayer in any state regarding all |
| for Form 1040 returns. The first examination will cover | | | | matters before the IRS. |
| wage and non-business 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. Current |
| testing period. The current approach requires paid | | | | plans are for a substantial increase in examinations |
| preparers to meet the competency testing | | | | from present levels. |