Tax Preparers: The Latest in IRS Certification Requirements

Tax Preparers: The Latest in IRS Certification Requirements

The IRS has been pushing for stricter regulations for tax preparers, leading to multiple court cases. Learn about the current certification requirements.

Friday, June 26, 2015/Categories: Practice Development

The US Tax Code is infamous for being complicated, but until recently, there was at least a clear idea of who could prepare tax returns. When the IRS proposed regulations that include a competency exam for tax preparers, things became a little muddy, largely because a lawsuit filed against the IRS argued that it didn't have the authority to impose such regulations. And in case you haven't been keeping up with the news, the back-and-forth court tussle over the issue still isn't entirely resolved.

So if you're a tax preparer getting ready for filing season, here's what you need to know.

Tax Preparers Need a PTIN

Any tax professional who prepares tax returns for compensation needs an IRS Preparer Tax Identification Number (PTIN). Whether you're an enrolled agent, a CPA, an attorney, or an unlicensed tax preparer, you need a PTIN before you can prepare or assist in anybody's tax returns. It's important to note that a firm can't share a PTIN; rather, every professional who handles a tax return must have one.

Currently, there are no other requirements for receiving a PTIN, other than an application and a $64.25 registration fee or a $63.00 renewal fee. Your PTIN needs to be renewed every year. To apply for or renew your PTIN, visit the IRS PTIN Requirements page.

Tax Preparers (Probably) Need an EFIN

If you or your firm plan on preparing and filing 11 or more tax returns, you will need to do so electronically. To e-file with the IRS, you will need an Electronic Filing Identification Number (EFIN). This is a free application, but it requires a bit more information. The IRS may perform a…

  • Credit check.
  • Tax compliance check.
  • Background check.

Additionally, if you're not a licensed professional, such as an attorney, a CPA, or an enrolled agent, you and any other principals in your firm will need to provide your fingerprints to the IRS. A firm may share a single EFIN. To apply for an EFIN, visit the IRS e-file page.

Changing IRS Requirements and the Annual Filing Season Program

With a PTIN and an EFIN, you're good to go. That's all you need to prepare and file tax returns for compensation – at least for right now. However, the IRS is seeking to impose stricter regulations for who can prepare and file taxes, citing a growing trend of error-ridden returns.

The attempt to impose stricter regulation has triggered a number of lawsuits against the IRS, but no conclusive picture has yet emerged. In 2013, a federal judge ordered an injunction that barred the implementation of new regulations, according to The Big Story. The regulations would have excluded licensed tax professionals, such as attorneys and CPAs. It also would have required all others to complete…

  • A qualifying exam.
  • An annual application fee.
  • 15 hours of continuing education courses a year.

The lawsuit, filed by three tax preparers with help from libertarian group Institute for Justice, argued that the IRS had no authority to enact such measures and claimed stricter regulations would put smaller tax preparers out of business.

In 2014, another lawsuit was filed after the IRS dropped its compulsory requirements and launched its voluntary education program. That lawsuit was dismissed, according to Forbes, and the voluntary program is still in effect. If tax preparers wish, they can complete the Annual Filing Season Program administered by the IRS and receive…

  • A record of completion.
  • Inclusion in the IRS's new public directory of tax return preparers.

No doubt the IRS will continue to seek stricter regulations for tax preparers, and more court cases will likely be in store, so tax preparers would be wise to stay current on the topic. To keep your business safe in the meantime, consider getting tax preparer liability insurance, which may come in handy if you don't stay quite as informed as you need to and end up facing a lawsuit of your own.

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