On the 1971 return the preparer signature attested that: “Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief it is true, correct, and complete.”
The sentence, “Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge,” was added to this statement sometime thereafter.
The 1977 return was the first that required, in addition to a signature, the preparer’s “identifying number”, later specifically referred to as the preparer’s Social Security number. Beginning with the 1978 Form 1040, the preparer’s “Firm’s name (or yours if self-employed), address and ZIP code” and its corresponding Employer Identification Number had to also be entered on the return under a section called “Paid Preparer’s Information.”
In an attempt to avoid identity theft, a “Preparer Tax Identification Number”, or PTIN, was created as an alternative to listing one’s Social Security number on the return. The 1999 Form 1040 was the first that asked for the preparer’s “SSN or PTIN”, and the first return on which I entered my PTIN, which is the same PTIN I use today.
Beginning with the 2010 return, all paid preparers were required to register with the IRS and obtain a PTIN as part of the new IRS mandatory Registered Tax Return Preparer regulation regime.
Up to the 2009 return, a PTIN was optional, and paid preparers could still use their Social Security number when signing a return. And up through 2009 there was no fee for applying for a PTIN, and one never had to renew one’s PTIN.
As a part of the IRS regulation regime, tax preparers were required to pay an initial $64.25 to receive, or “refresh” an existing, PTIN. PTINs were required to be renewed annually at a cost of $63.00. The PTIN fee was established as a method of partially funding the mandatory RTRP program, and annual renewal was initiated so that the preparer could verify that they had taken the required hours of continuing professional education.
Let’s face it: The IRS mandatory RTRP regulation regime is dead. Or it will be dead once the court officially denies the IRS appeal of the decision in Loving v. IRS, as everyone in the industry believes will happen. And, considering the recent IRS troubles, I doubt very much that Congress will give the service the authority to regulate tax preparers.
With the death of the mandatory RTRP program, there is no need to charge such a substantial fee, or any fee, for acquiring or maintaining a PTIN. And there is really no reason for annual renewal. A preparer’s PTIN could be renewed every three years, at no charge, so the IRS could remove preparers who no longer prepare from the system.
The IRS truly needs to maintain a registry of tax return preparers, via the issuance of a PTIN, and the judge in Loving v. IRS allowed the IRS to continue to require that all paid preparers register with the service and receive a PTIN. But, although the court in another case (Brannen, III, P.C. v. U.S., No. 11-14138) has upheld the ability of the service to charge a PTIN fee, $63.00 is now certainly excessive and unjustified.
The annual PTIN renewal fee is almost as bad as the $100 that all paid preparers, except for CPAs, attorneys, and Enrolled Agents, are required to send to the State of New York each and every year in order to be able to prepare New York State tax returns.
I prepare more than 20 New York State individual income tax returns (IT-201 and IT-203) each year, and my invoice to clients for whom I prepare a N.Y. return includes a separate line item charge of $5.00 which I clearly identify as “New York State Tax Preparer Extortion Fee Surcharge.”
Once the mandatory RTRP regulation regime has been finally declared truly dead ,the tax preparer membership organizations should actively lobby the IRS to reduce, or eliminate, the initial and annual PTIN fees.
Robert D. Flach has been a tax preparer since 1972, and blogs as The Wandering Tax Pro, as well as writing on taxes for MainStreet.com.