Since the year 2010, the IRS has been taking steps to regulate tax preparers, in order to improve the quality of tax returns and to protect taxpayers from tax preparer fraud and incompetence. These steps have included requiring tax preparers to obtain a Preparer Tax Identification Number, pass a competency test, pay an annual fee, and meet continuing professional education requirements. CPAs, attorneys, and enrolled agents have been exempt from these requirements since they are subject to their own requirements and standards.
But in January 2013, a U.S. District Court judge ruled in favor of three independent tax preparers and against the IRS, indicating that Congress did not grant the IRS the authority to license tax preparers and that the IRS could not grant itself that authority. The judge’s decision included an injunction blocking the implementation of the IRS Registered Tax Return Preparer program.
As reported by Kelly Phillips Erb in an article posted on Forbes, the IRS filed a motion to stay the injunction until an appeal could be filed. But the federal court denied the motion on February 1, 2013.
Then, as reported by Patrick Temple-West for Reuters, the court modified its order and allowed the IRS to keep the program for registering and testing tax preparers. The program would be voluntary and the IRS could not make it mandatory for tax preparers to take the tests or pay the related fees. According to the report, the IRS has already spent millions to set up and implement the program.
Michael Cohn reports in Accounting Today that the clarification of the court’s earlier ruling also indicated that it did not affect the regulations requiring tax preparers to have a Preparer Tax Identification Number (PTIN). The report points out that the court indicated that tax preparers may wish to voluntarily take the exam and comply with the continuing education requirements in order to gain those credentials and distinguish themselves from other tax preparers.
So, the PTIN Requirements for Tax Return Preparers continues to be posted on the IRS website, indicating that the requirements were not affected by recent litigation. The cost of the PTIN is $64.25 per year and an application can be submitted online or on paper. The IRS has also posted Frequently Asked Questions for tax preparers, pointing out that tax return preparers are not required to register with the IRS, pass competency tests, or take continuing education.
Frank Byrt and Anne Rosivach, Court Rules IRS Can’t License Tax Return Preparers, Accounting Web
Patrick Temple-West, UPDATE 1-U.S. judge freezes IRS tax preparer rules for now, Reuters
Kelly Phillips Erb, IRS Loses Big In Court (Again), Tax Season Chugs Along, Forbes
Michael Cohn, Court Modifies Ruling Invalidating Tax Preparer Regulations, Accounting Today
PTIN Requirements for Tax Return Preparers, IRS
Requirements for Tax Return Preparers: Frequently Asked Questions, IRS
Return Preparer Regulations – Overview, IRS