Update on Proposed IRS Tax Preparer Registration Rules
A guest post by William Brough, MBA
Universal Accounting Tax Curriculum Specialist
As many of you may already be aware, the Internal Revenue Service has recently announced major changes in 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, were considered “enrolled” by the IRS under the old system). As long as you could find willing customers, you could get paid for preparing 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). 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 solving, and although you might be able to offer some quick advice, there was nothing substantial you could do for him.
Now, however, after several years of talk, rumors, discussion and debate, the IRS has clarified 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
This phase is simply registration. Even if you already have a PTIN number and are an enrolled preparer, you must register with the IRS beginning September 1, 2010, and declare your intention to continue working as a professional tax preparer. Anyone who does not do so by December 31, 2010, will not be allowed to prepare paid tax returns in the 2011 calendar year. 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.
Believe it or not, the reason for this 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 other steps can follow. Do not ignore this important requirement. There will be no grandfathering of prior tax preparers for 2011, even if you have prepared taxes for years, and even if you are already an enrolled tax preparer.
Phase Two
Phase Two of the new regulation requires all paid tax preparers to pass a test demonstrating their qualifications within three years, although whether that three years begins when registration does, in 2010, or when the test becomes available, in 2011, is still undetermined. Since all enrolled preparers have already passed a proficiency exam, this requirement is directed only at unenrolled preparers.
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 practices.
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
During this phase, new IRS regulations require 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.
This is a fantastic opportunity for tax preparers who are serious about their practices, 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 the corresponding withdrawal of sleazy and dishonest tax preparers, the kind who promise a refund no matter what and/or 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 receive up to 60 CPE credits, depending on the number of modules you complete.
Take time this summer to 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.

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