The Internal Revenue Service has implemented new regulations that impose significant restrictions on tax preparers and tax preparation businesses.
The purpose of the new regulations is to improve the accuracy of return filings by ensuring preparers are competent and ethical in providing paid services.
In the past few years, people have had to obtain a PTIN (Personal Tax Identification Number) in order to prepare returns for compensation.
Before this, tax preparers were able to use either a PTIN or their Social Security number. To help eliminate fraud, the IRS has imposed restrictions on tax preparers.
It is important to know if the tax preparer you use is qualified and authorized to complete the return. All tax preparers who are not certified public accountants, enrolled agents or tax attorneys must not only obtain a PTIN, but also pass a competency test by 2013. By the end of 2013, more than 350,000 tax preparers will be required to demonstrate competence in individual tax law by passing the Registered Tax Return Preparers test with a score of at least 70 percent.
In addition to passing the RTRP test, tax preparers who are not CPAs, attorneys or EAs must complete 15 hours of continuing education annually. They must also pass a background check conducted by the IRS.
Registered Tax Return Preparers are governed by IRS 31 U.S.C. 230 (Rev. 8-2011): “Practice as a registered tax return preparer is generally limited to preparing and signing tax returns and other documents for submission to the IRS.
“A registered tax return preparer may only represent taxpayers before revenue agents during an examination if the registered tax return preparer signed the tax return for the taxable year or period under examination. A registered tax return preparer does not have the authority to provide tax advice to a client or another person except as necessary to prepare a tax return intended to be submitted to the Internal Revenue Service.”
Tax preparers who cannot pass the RTRP test will be forced to leave the industry. Certified public accountants, enrolled agents and tax attorneys already have stringent regulations.
An enrolled agent is a person who has earned the privilege of representing taxpayers before the IRS by passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee.
Enrolled agent status is the highest credential the IRS awards. Individuals who obtain this elite status must adhere to ethical standards and complete 72 hours of continuing education courses every three years.They have unlimited practice rights and can represent taxpayers before the IRS.
The IRS will soon have a registry online where you can check the status of the tax preparer you intend to use. Choose wisely.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at firstname.lastname@example.org.