Tax Preparer Regulations

Tax Preparer Testing and Continuing Education Requirements

Suspended at this Time – Get the Latest Information Below

Timeline:
During 2009, IRS Commissioner Doug Shulman conducted a 6-month background study on Tax Preparer Standards. Input was obtained from all segments of tax industry participants to develop “uniform and high ethical standards of conduct for tax preparers” as a way to increase tax compliance and reduce the “tax gap.”

The result of that study was the announcement by Commissioner Shulman on January 4, 2010 of the IRS plan to require “unenrolled” paid tax return preparers to register with the IRS and pass a basic test competency exam. The IRS announced that all paid tax return preparers must be attorneys, CPAs, EAs, or registered tax return preparers, unless they are supervised by such individuals or prepare returns not covered by the competency exam. Passing a basic competency exam, passing a brief background check, and obtaining a PTIN (preparer tax identification number) would be required in the near future to become a registered tax return preparer. Once you have a PTIN with the IRS, you would be subject to 15 hours of annual continuing education.

Beginning in 2012, the IRS began ramping up this new program as a competency test and continuing education were put into place. The Income Tax School offered both RTRP Tax Preparer Testing programs as well as Continuing Education courses that met the RTRP requirements.

On March 13, 2012, three tax preparers joined with the Institute for Justice in filing a lawsuit against the IRS in the U.S. District Court for the District of Columbia. The three are accusing the IRS, among other things, of lacking the authority to license tax preparers. The IRS lost the suit in early 2013, as the judge ruled that the IRS did not have the authority to regulate tax preparers.

Effective January 18, 2013, the IRS has suspended RTRP requirements. Tax return preparers covered by this program are NOT currently required to complete competency testing or secure continuing education.

Here are the official statements from the IRS:

“On Friday, Jan. 18, 2013, the United States District Court for the District of Columbia enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not required to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.

On Friday, Feb. 1, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN). Consistent with this modification, the IRS has reopened the online PTIN system.

We remain confident in our legal authority and committed to protecting taxpayers
through implementing reasonable standards in the tax preparation area. Our appeal of the district court opinion was filed on Mar. 29, 2013.”

Update May 16, 2013
“Fee amounts collected for scheduled registered tax return preparer test appointments canceled due to the court ordered injunction are being refunded. Additionally, fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined, are also being refunded. No additional refund or reimbursement requests related to registered tax return preparer regulation are being provided or considered at this time. E-mail notifications will be provided to those receiving refunds to explain the process. No action is necessary to receive the refund. A credit for the test fee will automatically be made to the account used to pay the fee. It is anticipated that all
refunds will be processed by July 19, 2013.”

The Income Tax School was an IRS approved provider of CE for the RTRP program which is now suspended indefinitely. Should this program be reinstated or another program be announced, The Income Tax School will be prepared to offer programs for those requirements. The Income Tax School is still approved by the Office of Professional Responsibility at the Internal Revenue Service as provider of qualifying continuing education for Enrolled Agents (EAs). Learn more about The Income Tax School credentials.

For more information about this issue from the IRS, please visit www.irs.gov/taxpros. To hear what other Tax Business Owners feel about this issue and many more, check out the LinkedIn Group headed by our CEO, Chuck McCabe, Tax Business Owners of America.

If you are thinking of becoming a tax professional, you should definitely take a tax preparation course.

The Income Tax School Comprehensive Tax Course will teach you the fundamentals of tax preparation and the correct way to prepare tax returns and research tax issues for most Form 1040 individual, non-business taxpayers and small business taxpayers (self-employed/Schedule C). Instructor support is included by practicing tax professionals that will assist you along the way to ensure your success.

When you complete the ITS Comprehensive Tax Course (in just 10 weeks or less) you will be

  • qualified for employment or self-employment as a tax professional
  • ready to start earning money
  • prepared for the IRS RTRP exam should it be reinstated

Continuing your education and staying up-to-date with the most current tax laws is always important.

The Income Tax School offers many 3-hour online continuing education seminars that you can pull together to meet your new annual requirements. Learn more

Current Status
Currently only two states, California and Oregon, license tax preparers.  The Income Tax School (ITS) is an approved provider of courses that meet the requirements for licensing in California and Oregon. The Income Tax School is also a sponsor of Continuing Professional Education (CPE) for CPAs, and is approved by the IRS Office of Professional Responsibility (OPR) as a provider of CE for IRS Enrolled Agents (EAs).

Maryland just recently added regulations for tax preparers. New York is considering a proposal. Learn more about New York’s proposal. Other states may follow suit in the coming years. Learn more

More FAQs (IRS website link)

The CTP® Advantage
By earning the professional designation of Chartered Tax Professional-CTP®, you will have the tax knowledge needed to prepare the most complex individual and small business tax returns. And equally important, you will have the credibility to instill confidence in your clients. You will also have the knowledge to easily qualify for the anticipated IRS licensing of tax preparers at both the individual and corporate tax levels. However, you will be qualified to start preparing individual tax returns for the general public after receiving your PTIN and completing just the first 60-hour course. Learn more

Your first step to success: enroll in the Comprehensive Tax Course today!

FAQs

Why do tax preparers need to be regulated?

The quick answer is that regulated tax preparers would result in more accurate tax returns and a more equitable sharing of the tax burden by U.S. taxpayers as intended by Congress.

In a recent report by the Treasury Inspector General for Tax Administration, 61 percent of a limited sample of tax returns prepared by unenrolled or unlicensed preparers contained errors resulting in a considerable net understatement of tax (see Study Results Boost Preparer Registration Movement).

Tax preparers should be regulated and licensed by the IRS in order to prevent unqualified tax preparers from practicing. As discovered by the General Accounting Office (GAO), tax preparers in Oregon, where stringent regulation of preparers exists, prepare more accurate tax returns resulting in greater compliance and revenue to the US Treasury. Correctly prepared tax returns result in all taxpayers paying their fair share of tax; no more and no less.

What states currently regulate tax preparers?

Currently, California and Oregon are the only two states regulate tax preparers.

What states have legislation passed or pending to regulate tax preparers?

  • Under a new Maryland law, all persons offering individual tax preparation services must become licensed with the State Board of Individual Tax Preparers. This is still in the works should be ready soon. For more information visit: http://www.dllr.state.md.us/license/taxprep/
  • Alabama has legislation pending.