The IRS is launching a new Registered Tax Return Preparer competency test in an effort to improve the tax preparation industry. Oversight of the tax preparation industry is a major initiative of the IRS, and this competency test is part of that initiative.  As of 2010, all paid tax return preparers are required to obtain a Preparer Tax Identification Number (PTIN), and now all preparers who have a valid PTIN will have until 12/31/2013 to pass the competency test.

Once a preparer passes the test and meets other requirements, he or she will be designated as a Registered Tax Return Preparer.  Like other designations, the Registered Preparers will be required to maintain their status by renewing their PTINs annually as well as completing 15 hours of continuing education every year.  Attorneys, Certified Public Accountants and Enrolled Agents will be exempt from these new requirements because they must already meet more rigorous guidelines in order to obtain their professional credentials.

There will be a fee for the competency test: $116.  This fee includes an IRS fee as well as a fee for Prometric Inc., which is a third-party test vendor.  The test covers preparation of Form 1040 and related schedules.  Test scheduling will begin the week of November 28, 2011.

Prometric will eventually administer the test at more than 260 centers nationally, but the test is not available at all locations currently. Test sites will be added daily and international locations may be added in the future.

The IRS estimates that approximately 350,000 people may be initially subject to the Registered Tax Return Preparer test requirement.

Fact Sheet 2011-12 provides additional details about the test, including which preparers are required to take it and how to schedule an appointment.

Daniel Stoica Accounting Professional

If you are like many Americans, you usually pay someone to prepare your tax return.  As with any individual or company that you ask to perform a service for you, it’s a good idea to do some research before you choose a tax preparer.  Even if you have someone else prepare your taxes, you are still legally responsible for what is on your tax return.

Here are some tips for finding the best tax preparer for you:

-Ask questions. Ask the preparer how he/she keeps up to date on changes in the tax code and what, if any, organizations he/she belongs to that would provide continuing education and resources.  Effective 2011, all paid tax preparers must have a Preparer Tax Identification Number (PTIN) that must be renewed every year.

-Check out the preparer’s fees.  Preparers should not base their fees on a percentage of your refund.  Also, check out several preparers in your area to see what the average fee is.  The fees should not be either too high or too low for your area and type of tax return.

-Do not sign a blank return, and run away from any preparer who asks you to do so.  It is your duty to sign the forms after you review them.  Also, make sure that your preparer signs the forms and includes his/her PTIN.

-Choose a preparer who looks permanent.  It may be important to contact your preparer after your return has been filed, so it’s a good idea to use one who doesn’t have a “fly by night” sort of operation.  Ask for a referral from a trusted friend or relative, or take a look at online sites that provide user reviews.

-Inspect the preparer’s history.  You can always check the Better Business Bureau to see if a preparer has several complaints.  CPA’s and attorneys have their own regulatory organizations that you can check as well.

Daniel Stoica Accounting Professional

The IRS announced that it will be sending letters to nearly 100,000 tax preparers who prepared returns this year, but didn’t follow the new PTIN (Preparer Tax Identification Number) rules. This part of the Internal Revenue Service’s oversight program of the tax preparer industry.

The IRS began an initiative to decrease the oversights of tax preparers who didn’t follow guidelines in 2010. The also began to regulate the conduct of those tax preparers. All preparers are now required to get a Preparer Tax Identification Number, or PTIN and, when preparing taxes, they must sign and include their PTINs on all tax returns refund requests they are paid to prepare.

Beginning July 7^th, 2011, the Internal Revenue Service started sending letters to preparers to preparers who had outdated PTINs or who used their Social Security numbers on the returns they prepared. This letter explained the IRS oversight program and explained how to register for a PTIN or renew an outdated one, and where to get help.

Many tax preparers have been in compliance, but some simply did not get the PTIN, so the letter from the IRS assisted them with getting in compliance. The IRS believes that everyone who is paid to prepare federal tax returns should be on the same page.

The IRS began the new PTIN registration program in the fall of 2010. Nearly 712,000 tax preparers have registered or renewed their PTINs since then. If they are not CPAs, attorneys, or Enrolled Agents, they must follow other requirements and pass a competency test and preparer suitability check. They will also be required to complete no less than 15 hours of continued education credits every year, beginning in 2010. 

The IRS is aware that some preparers might try to get out of this oversight program by not signing the returns they prepare, so taxpayers should hire a preparer who will sign their returns and add their PTINs.

The IRS’s attempts to find these “ghost preparers” will be to send letters to taxpayers who had their returns professionally prepared, but the preparer neglected to sign the tax return. The letter will let taxpayers know how to file a complaint against the preparer and will tell them how to find a preparer who is in compliance. This tactic is an effort to protect taxpayers from preparers who refuse to follow the law by being registered with the IRS.

Being in compliance is the major focus of the new program and the letter from the IRS is a step closer to getting preparers registered with new or renewed PTINs and follow the regulations. The IRS also says it will do its best to find the non-compliant preparers and meet with them face-to-face over the next two years.

Daniel Stoica Accounting Professional

Every year the tax laws change, so keeping up-to-date and taking new certification courses is crucial and, very often, required. A list of some of the courses and what they entail is the subject here.

New IRS regulations require that all paid tax preparers obtain a PTIN (preparer tax identification number). Renewals for the 2012 tax season are likely to start in October of this year. Some tax preparers will need to pass a competency test and background check as well as take continuing education courses.

Current tax and accounting professionals already possess important educational and technical skills. Because they already posses the necessary skills, the objective of a continuing education program is to enhance and strengthen these skills and correspond with the level of professional ability of the tax preparer and accountant. 

PTIN Registrations and Basic Competency Exam: Registered preparers have three years to pass a basic competency test.  Beginning in the summer of 2011, the IRS updated basic competency exam will be available for tax and accounting professionals.

Continuing Education: All registered preparers will be required to complete 15 hours of continuing professional education annually to continue to practice.  The annual CPE must include: Ten hours of federal income tax; 3 hours of federal income tax update; and 2 hours of ethics.

The subject matter of the federal income tax course generally includes the basic concepts found in the Internal Revenue Code.  It will continue an exploration of “income”, in depth, and the difference between ordinary income and capital gains. It will also go into greater detail about the exclusions and deductions that can reduce a taxpayer’s income. The course will also prepare professionals for more in-depth research and how to resolve the new federal income tax issues in their practice.

In the federal income tax update, the course delves into the major provisions of new tax legislation, including, cases and regulations and their impact on individual taxpayers, businesses, investments and retirement plans. The main focus is on tax planning for investments, businesses and financial planning. Useful solutions to problems of the tax professional and comprehensive tax planning is be emphasized.

Everyone in every business setting knows that ethics are an important part of doing business, and for tax professional, that is no different. They are dealing with large sums of money and they are responsible for their clients’ finances. In the ethics course, the tax professional will learn ethical standards, whether employed in public, governmental, or private accounting. These principles are based on the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, which is the standard for all tax professionals. The course also explains the issues, developments and problems addressed by recent AICPA and SEC Ethics updates.

Just to be clear, the following types of programs do not meet the objective of continued certification:

Courses that help prepare for the Special Enrollment Examination (the test that individuals take when they first become a tax professional); basic tax courses tailored to the general public that a tax professional should already know; or programs not directly related to Federal taxes.

There is still time to register for the 2011 course. You can find the registration form at http://www.irs.gov/newsroom/article/0,,id=228266,00.html.

Daniel Stoica Accounting Professional