Beginning in 2011, the Internal Revenue Service will be changing the rules for tax preparers who are paid to complete and file an individual or a business tax return. The IRS will require all paid tax preparers to register with the agency and take tests of competency and pass successfully. The only caveat is that two competency exams do not need to be passed until December 31st, 2013. This new regulation is a national measure meant to raise the standards of companies that provide tax preparation and filing services. The move is the largest change to ever affect the industry.
Tracking Made Easy
In 2011, all tax preparers that are paid to complete tax returns must provide their registration number, or PTIN, on all returns on which they assist in preparation. The IRS can then use this number to identify the preparer that has made a large amount of mistakes whether the errors were fraudulent or innocent in nature. In the event large numbers of errors are attributed to an individual preparer, the IRS can impose penalties. Taxpayers will be able to search a database created by the IRS to determine which tax preparation professionals are registered properly.
Who Will This Affect?
The new IRS regulations will not affect certified public accountants or tax lawyers because both groups are already required to be held to the standards of other professional associations. Other preparation individuals not included in the regulations by the IRS include volunteers who do not get paid for services like those working for AARP or the IRS Volunteer Income Tax Assistance service.
The large majority of affected groups will be the self-employed individuals who do tax work for friends and family for a fee. Also, tax preparers who are working for a large chain agency like H & R Block and Jackson Hewitt Tax Service be required to register with the IRS. Most national chains are in support of the measure and have worked closely with the Internal Revenue Service to create the new tax industry regulations. Additionally, most chain agencies train their employees above and beyond what the IRS will require. Some do argue though that those registered may not be the ones actually completing the forms, but only signing off on them.
Steps Taken
The steps toward the new regulations have begun already in 2010. The IRS will begin setting up online registration for paid tax preparers. Every tax preparer must be registered before the 2011 tax season. It is not yet known what the registration fee will be.
There will be two tests required which will be available in the Spring 2011. The tests will be available online and of the two tests, the individual must pass one to be licensed. The first test will cover wage and non-business Form 1040 and the second will cover the wage and small business Form 1040, which includes Schedules C, E, and F as well as other related documents. Ongoing design of the registration program for preparers as well as the renewal process is being conducted by a management consulting firm contracted by the IRS.
The End of an Era
2010 will be the last year individuals can get paid for preparing taxes without registering with the IRS. The agency hopes to improve on the tax industry as a whole and provide consumer protection from bad tax advice by unknowledgeable preparation service workers. All individuals looking for registered tax assistance is urged to consult with the IRS database once established to find a new preparation service or to find out if their current tax preparer is licensed.
I am 68 years old and have paid all required taxes and on time since being 15. I retired to take SS early because of health reasons from my main job of 25 years. I had a CPA complete my taxes in 2005 and the government changed my income by 10,000 for reasons I still don’t know. Five years later SS took back 3,000 because they claimed I made 18,000, but my W-2 indicates it was 15,000 not what they claimed. Two years after the fact , they took back over $1,000 from my wife’s SS. I suffered from depression off and on for the period 2005 thru 2009 and allowed a friend to do my taxes and in 2011 I found out 2006 year’s taxes were not filed although the friend for over 42 years claimed they were filed electronically but couldn’t produce any records or proof. I filed the taxes immediately and sent them in. To make a long story short these people are coming after me like white on rice and, based on their correspondence, it appears I am dealing with people who are one click from being robots. I own nothing but an old truck worth $5,000 and a car where I owe 15,000 and now with the $10,000 the IRS claims I owe them, my net worth is: minus $20,000. I earn $11.00 an hour and collect my small retirement check I earned and which almost caused me to lose my sanity. I trusted a friend of 42 years; got screwed, SS comes after me 5 years after the fact and claims I made too much money at my $11.00 job and now the IRS is out for blood. I will pay the price for my ignorance, but, my opinion of SS & IRS will be……guess I won’t say it!!