PTIN Fees: Will They or Won’t They?

By Chuck | October 18, 2019
IRS Refund Myths

It’s officially PTIN time. As of October 16th, the IRS has opened up Preparer Tax Identification Number applications and renewals for the season. This year, there is no fee for obtaining your PTIN, however don’t mistake that for not needing one. If you receive compensation for preparing or helping to prepare tax returns, you are still required to have a PTIN. Not having one will result in penalties, injunction, and disciplinary action by the IRS Office of Professional Responsibility.

Thanks to a class action lawsuit against the IRS by Adam Steel and Brittany Montrois in 2014, tax preparers have been living the free PTIN life. But that may change next year as the IRS has been fighting that ruling in court.

PTINs: A Quick History

As you know, if you prepare tax returns for compensation, you are required to sign all returns you prepare. Prior to 1999, tax preparers were required to use their social security number to identify themselves as the official preparer of the return. The use of your social security numbers, however, became a huge identity theft concern as fraud grew and so in 1999 the PTIN was invented as an alternative number to identify tax return preparers.

In 2010, the IRS not only made the use of PTINs mandatory, they started charging a fee for them: $64.25 initially and $63 to renew each year. Here’s the point of contention that is coming up in court cases now.  The fee was justified under 31 U.S.C. § 9701, which permits federal agencies to “charge for a service or thing of value provided by the agency.”

In the class action lawsuit that made PTINs free, the plaintiffs claimed that PTIN fees were not issued in exchange for a “service or thing of value.” The court ruled in favor of the Plaintiffs “because this would be equivalent to imposing a regulatory licensing scheme and the IRS does not have such regulatory authority.”

What’s Happening Now?

The IRS has been working to appeal the ruling ever since. In March of this year, a court in D.C. ruled in favor of the IRS, finding that the IRS does in fact provide a service in exchange for the fee. The service being the allowance of using a PTIN instead of an SSN. The plaintiffs have now appealed to the Supreme Court, who, as of October 7th have denied hearing the case.

While the IRS has not made any official announcements or public comments, tax preparers will likely see PTIN fees return next year. Here’s your reminder to renew!