Now that the Internal Revenue Service has issued the first of its Registered Tax Return Preparer designations, one of the service's priorities will be getting some 340,000 preparers to take the necessary competency test, according to David R. Williams, director of the IRS Return Preparer Office.
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Since the test became available last November, some 3,000 preparers have passed it, and approximately 6,000 others have scheduled theirs, according to Williams. He declined to discuss actual pass rates, citing the need for a larger sample size, but he did note that 340,000 tax preparers have provisional Preparer Tax Identification Numbers but are not CPAs, tax attorneys or Enrolled Agents, who are all exempt from exam requirement.
"One of the most important messages we're trying to get out to the 340,000 remaining people who need to take the exam is that it's time to take the test," he said. "Our big concern is that most in that 340,000 know taxes well but haven't taken an exam of any kind in many years." Williams added that he is satisfied with the number of just some 3,000 designations so far. "There's test anxiety out there and people naturally procrastinate. Plus the IRS launched the exam in November and there was a filing season coming up."
Test registrations have started to pick up now that filing season is over.
In addition to obtaining and annually renewing a PTIN, non-exempt return preparers must also complete 15 hours of continuing education annually, pass a one-time competency test by Dec. 31, 2013, and pass a tax compliance check. CPAs, attorneys and EAs are exempt from the new education and testing requirements because they already have separate requirements. Also exempt are non-signing preparers employed by law or accounting firms who are supervised by CPAs, attorneys or EAs and those who do not prepare the Form 1040 series.
Preparers with a testing requirement can schedule the test by accessing their PTIN account online. The test can be taken at more than 260 sites, and the test fee is $116. Tax preparers can learn more online about the test, which is administered by the testing company Prometic.
"We believe there are hundreds of thousands of preparers who prepare returns, and the vast majority are highly professional and committed to doing a good job," Williams said. "Others run the gamut from not knowledgeable to actively fraudulent." One of the key areas for inaccuracy or fraud was the Earned Income Tax Credit, he noted.
Williams was instrumental in rolling out the new mandatory registration requirement for all federal tax return preparers, helping to lay the groundwork for testing, education and other requirements now underway. Many are working to comply with and have applauded the new requirements. A small number have challenged need for the designation, however, citing in some cases decades of tax preparation with no testing, CPE or designations.
Williams believes that "these changes are improving the tax professional industry by establishing standards that promote competent and ethical tax professionals." He added that RTRP is the "first credential that will have the IRS stamp since the [Enrolled Agent]."
GETTING THE WORD OUT
Williams said that the IRS plans imminent efforts to communicate the need to meet the designation requirements to tax preparers and tax prep associations and groups. The Return Preparer office has also set up a Facebook page.
Spreading the word completely could be daunting: In its Return Preparer Review issued in 2009, the IRS admitted that the exact number of paid tax return preparers was unknown, but estimates that between 900,000 and 1.2 million individuals prepared tax returns for a fee.
"To date we've issued only about 850,000 PTINs, and about 710,000 are active," Williams said. "The challenge for us is, how do we address the whole spectrum of all paid preparers? We are just learning about the preparer population."
The IRS plans to establish a public database later this year of PTIN holders that will specify what credentials, if any, a person has, including the new RTRP credential. Williams said the IRS also plans to help promote public awareness of the importance of the RTRP designation and the qualifications needed to acquire it.