| At present, any person may prepare a federal tax | | | | testing requirements no later than the initial required |
| return for any other person for a fee. The IRS | | | | renewal date for tax return preparer registration. Jan. 1, |
| estimates that there are between 900,000 and 1.2 | | | | 2011, is the current target date for requiring all paid |
| million paid tax return preparers currently. Attorneys | | | | signing preparers to be registered and to use a |
| and Certified Public Accountants receive a state | | | | Preparer Tax Identification Number (PTIN). The IRS |
| license, while Enrolled Agents receive the privilege to | | | | does not plan to institute testing until after registration |
| practice directly from the federal government. Other | | | | and mandatory 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. |
| Mandatory Tax Preparer Registration | | | | Enrolled Agents, Attorneys, and Certified Public |
| Certain paid tax return preparers such as attorneys, | | | | Accountants are not required to complete the new |
| certified public accountants or enrolled agents are | | | | CPE 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). | | | | representatives. An un-enrolled preparer's ability to |
| The IRS will require all non-exempt individuals who | | | | practice before the IRS is very limited. Generally, it is |
| are required to sign a federal tax return as a paid tax | | | | limited to the examination function of the Service, and |
| return preparer to register and obtain a preparer tax | | | | only with respect to a return he or she prepared. |
| identification number. The IRS will make tax return | | | | Consequently, an un-enrolled preparer cannot practice |
| preparer registration effective for three-year periods | | | | before appeals officers, revenue officers, and counsel. |
| and require tax return preparers to renew their | | | | In addition, an un-enrolled preparer cannot execute |
| registration and certify continuing education every at | | | | claims for refund, receive refund checks, execute |
| each renewal. | | | | consents to extend the statutory period for |
| The IRS Exam | | | | assessment or collection, execute closing agreements, |
| The IRS will institute competency testing and will | | | | or execute waivers of restriction on assessment or |
| perform suitability checks on those paid tax return | | | | collection of a deficiency in tax. If you plan to prepare |
| preparers. Suitability checks often include criminal | | | | returns, the enrolled agent designation can open new |
| background checks and tax compliance checks. A | | | | opportunities for your practice and expand your |
| tax compliance check is a review of the | | | | capability to assist more taxpayers. An enrolled |
| preparer’s personal filing and payment | | | | agent is the only professional granted a right to |
| history. There is no "grandfathering" from the testing | | | | practice directly from the U.S. government. An |
| requirements based on experience. | | | | enrolled agent may represent any taxpayer in any |
| Initially, the IRS will offer two competency examinations | | | | state regarding all matters before the IRS. |
| for Form 1040 returns. The first examination will | | | | Why Representation Matters |
| cover wage and nonbusiness income, while another | | | | While more taxpayers are turning to software to help |
| examination will additionally cover small business | | | | them prepare returns, a program does not exist that |
| income (Schedule C). IRS plans call for a third test to | | | | can represent them during an audit. According to |
| address the competency of the tax return preparer | | | | enforcement results published by the IRS in 2009, |
| with regard to more complex business tax rules once | | | | examinations of individual returns increased over 100% |
| the initial three-year implementation phase is | | | | since year 2000. Throughout this period, the number |
| complete. The IRS is developing transition rules to | | | | of examinations rose every year through 2009. |
| avoid the interruption of services to taxpayers during | | | | Current plans are for a substantial increase in |
| the initial testing period. The current approach | | | | examinations from present levels. |
| requires paid preparers to meet the competency | | | | |