The tax preparer landscape will change rapidly and dramatically during the next twelve to eighteen months.
This is directed primarily to tax preparers and the known changes that will take place over a period beginning on January 1, 2011 and through year end 2013. However, you, the taxpayer, will be informed as to what the IRS is doing to protect you from marginal preparers.
What Unenrolled Preparers Can Expect
If you are presently a unenrolled paid preparer of tax returns, your world is about to experience a sea change. Under the regime presently in existence until December 31, 2010, there are minimal rules or regs that directly affect your preparation of tax returns. There are only a few states (example: California and Oregon) that legislate tax preparers. After January 1, 2011 the IRS will institute vast changes to be implemented over the next three years, including who is permitted to prepare tax returns.
The IRS advised on August 20 that beginning in mid-September the online site to apply for a Preparer Tax Identification Number (PTIN) will be operable. The cost to acquire your PTIN will be $64.25 ($50 to the IRS and $14.25 to the third party vendor providing the service). This PTIN will be valid for one year, and under existing regulations must be renewed annually. HINT: It is V-E-R-Y important you apply for the PTIN immediately after it becomes available. First, you cannot prepare paid returns after December 31, 2010 without a PTIN. Secondly, if you apply for a PTIN after the date the 1040 certification exam becomes available, you will N-O-T be eligible to receive a PTIN until after you have passed the certification exam.
Securing your PTIN between mid-September 2010 and early 2011, when the certification exam becomes available, authorizes you to prepare tax returns through 2013 without taking the exam. You will still be required to complete the fifteen hours of CPE annually between 2011 and 2013.
The IRS has provided a very brief window through August 23, 2010 to submit comments on proposed regulations (REG 139343-08). A hearing on the proposed regs is scheduled on August 24, 2010 in Washington, DC. See IR 2010-91.
Application of Circular 230 to Currently Unenrolled Preparers
The IRS has released proposed regulations that would amend Treasury Circular 230, the rules governing practice before the IRS. The Circular 230 rules presently apply to attorneys, CPA’s and Enrolled Agents. Under the proposed regulations, Circular 230 would also apply to all tax preparers, including currently unenrolled return preparers.
The proposed regulations (REG 1386370-7) clarify the definition of practice, establish the new registered tax return preparer designation and the eligibility requirements for becoming a registered tax return preparer. This proposed reg covers eligibility to become a registered tax return preparer, standards with respect to the preparation of returns, revised rules for continuing education providers (CPE), and amendments to various sections of Circular 230. Tax professionals and others have until October 7, 2010 to submit comments regarding these proposed regulations.
No one, including the IRS, has all of the answers regarding the changes that are coming. However, you may be confident multiple changes are on the way and they will greatly affect all paid tax preparers.
Just as possessing a driver’s license doesn’t make one a good driver, the new rules coming will not solve every problem. However, it will enable the IRS to identify and weed out unscrupulous, under educated and fly-by-night preparers who have preyed on taxpayers for decades.