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Are You Ready For The New IRS Tax Regulations?

New IRS Tax Regulation Rules
As many of you may already be aware, the Internal Revenue Service has recently announced major changes to the way they treat professional tax preparers. For years, it was possible to “fly under the radar” with regard to the IRS if you were not an enrolled tax preparer (CPAs, attorneys, and EAs or enrolled agents, are considered “enrolled” by the IRS under the old system). As long as you could find willing customers, you could prepare paid returns, develop a tax practice, grow your clientele and make a good living without having to register with the IRS. You could even receive a PTIN (preparer tax identification number) and EFIN (electronic filing identification number) and as long as you filed honest, accurate returns, the IRS basically ignored you.

Of course, if you weren’t enrolled, there were limits to what you could do for your clients. Primarily, you couldn’t represent your clients before the IRS in the event of an audit or other IRS inquiry unless you were the preparer of the return in question. If you were like me, you were fine with that division of duties. But occasionally, someone who knew what you did but preferred to prepare his own returns would suddenly come to you with an IRS problem he wanted help to solve, and although you might be able to offer some quick advice, there was nothing of substance you could do for him.

Now, however, after several years of talk, rumors, discussion and debate, the IRS has made clear that it plans to regulate even unenrolled tax preparers, requiring them to officially register and comply with the same basic ethical regulations that already apply to enrolled preparers. This sweeping change will be implemented in three phases, beginning later this year.

Phase One
September 1, 2010 to January 1, 2010

Phase One is simply registration. Even if you already have a PTIN number, and even if you are already an enrolled preparer, you must register with the IRS beginning in mid-September, 2010, and declare your intention to continue working as a professional tax preparer. Anyone who does not do so will not be allowed to prepare paid tax returns after December 31, 2010. For new preparers, a PTIN will be issued at the time you register. Preparers who already have a PTIN must still register, but will be re-issued the PTIN they already have.

Registration will be available online at www.IRS.gov/taxpros. A fee of $64.25 will be required to register, renewable annually. Tax preparers will no longer be able to keep their PTIN from year to year simply by continuing to file returns.

Believe it or not, the reason for Phase One is that the IRS does not even know how many professional tax preparers it will have to regulate. So registration is the first step, without which none of the others can follow. Do not ignore this important requirement. There will be no grandfathering of tax preparers, even if you have prepared taxes for years, and even if you are already an enrolled tax preparer.

Phase Two
January 1, 2011

Phase Two of the new regulation requires all paid tax preparers to pass a test demonstrating their qualifications. Since all enrolled preparers have already passed a proficiency exam, this requirement is directed only at unenrolled preparers. 

If you have a valid PTIN by the time the test becomes available (currently expected to be mid-2011) you will have until December 31, 2013 to pass. However, once testing starts, registrants will be required to pass the test before they will receive a PTIN number, so the opportunity for a grace period lasting through 2013 will be lost. After mid-2011, if you fail the test, you cannot prepare paid returns.

Therefore, even though registration is technically possible after January 1, 2011, right up to the the day the test is up and running, it is best to do so before December 31, 2010, since a valid PTIN will be required to prepare returns in the 2011 calendar year.

The test will consist of two parts, one on wage and non-business 1040 returns, and one on small business (Schedule C or F) 1040 returns. Only preparers who have passed the appropriate test will be allowed to prepare paid returns of that type, but it will not be required of any preparer to pass both tests. Thus, if you only plan to prepare individual returns, you needn’t take the small business test, and vice versa. It is expected that a third test for business returns (such as Forms 1065, 1120 and 1120S) will also be available soon for those who wish to include them in their practice.

Testing will be administered at testing centers nationwide through Prometric, the same company that administers the EA exam. No online testing from home will be offered. Note that if you do not register with the IRS in 2010, you will have to pass the test before you will be given a PTIN. The three-year testing window only applies to those who have been issued (or re-issued) a PTIN prior to 2011.

Phase Three
Summer 2011 to January 1, 2014

Part Three of the new IRS regulations requires that all unenrolled preparers, who have been given a PTIN and have passed the new IRS exam, must take 15 hours of continuing professional education (CPE) credits during the three year cycle, of which at least three hours must involve federal tax law updates, and two hours must involve professional ethics. At the same time, it has been announced that even unenrolled preparers will be obliged to comply with the requirements of IRS Publication 230, which currently governs the legal and ethical obligations of enrolled preparers.

Also note that here will be a one-time registration fee, although the amount of the fee has yet to be announced. It is expected to fall somewhere between $75 and $300 for the entire three year registration cycle. After that, an ongoing annual fee, similar to what enrolled preparers now pay ($125) is expected to apply.

Prepare Yourself!

This is a fantastic opportunity for tax preparers who are serious about their practice, or who wish to finally begin a tax preparation career, to take a big step forward as professionals. With increased requirements will come increased respect for the tax profession, and a corresponding dropping out of sleazy and dishonest tax preparers, the kind who promise a refund no matter what, or who are under-qualified, if they have any qualifications at all. Just meeting the new IRS requirements will provide a huge marketing opportunity as you grow your practice. Rest assured, Universal Accounting® will be there to help you with all the great training and marketing resources we have to offer.

Universal Accounting®’s Tax Training

If you would like to become eligible to prepare taxes under the new regulations established by the IRS, consider training with Universal Accounting®.  Not only could you earn the Professional Tax Preparer Designation, but you could also learn everything you need to know to pass the IRS Competency Exam and receive up to 60 CPE credits, depending on the number of modules you complete.

Acquire the expertise necessary to become a Professional Tax Preparer before next tax season.  UAC’s Professional Tax Preparer (PTP) program will not only give you hands-on training in completing full individual (1040) and business returns (1065, 1120, 1120S), but it will also provide you with the following:

• 20 hours of valuable video instruction
• 2 instructional manuals
• Step-by-step instruction in becoming a sole practitioner
• One year of follow-up support from expert tax preparers
• The opportunity to earn valuable professional certification
• Our iron-clad, risk-free guarantee

Be prepared for the changes that will impact all future tax preparers.  Enroll in the Professional Tax Preparer Program today, and improve your competitive advantage while securing your professional standing in the tax industry.