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.
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.
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.
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.
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.
This post was published on August 4, 2010