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Why Is There Still an Excessive PTIN Fee?

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For as long as I have been preparing 1040s, since February of 1972, paid preparers have been required to sign the tax returns they prepare.

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.

8 Comments

Let's put this in terms I can understand. $63 equates to 104 Rolling Rocks. THAT'S a big deal to me.

Posted by: v-rodcpa | November 7, 2013 4:34 PM

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With over 694,000 PTIN's active (per IRS count) that's over $43 Million dollars to cover Line Dances, Star Trek videos, or at least make a dent in teh $63. they lost and can't find for spending on Obamacare!

Posted by: PAT | November 7, 2013 12:03 PM

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No problems before 230 so why now? Good timeline that about coincides with mine, and I still feel we should not have to pay to engage in business-that is government out of control. We are best suited to regulating ourselves, just look at the non-compliant government that is to regulate us and the amounts they owe, which would land us out of business and a job.

Posted by: BRES | November 7, 2013 10:27 AM

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For those who don't think paying a mere $63 or $116 per year is not an issue, continue paying that fee. Personally, I feel that any money paid to a government for my right to engage in commerce is extortion! And having obtained a PTIN (and having to pay the costs of fingerprinting, and my time to obtain that PTIN in the first place, to reduce the possibility of identity theft) the cost to the IRS for my PTIN is zero per year, why should I pay a fee to keep it active? After all, the purpose of the PTIN was to reduce a risk that the IRS created in the first place!

Posted by: SullivanAcctg | November 7, 2013 9:54 AM

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What is the big deal on a $63.00 fee for a PTIN renewal - or the $116.00 fee many of us paid for the RTRP testing? If one were afraid they couldn't have passed the test then perhaps they really aren't 'competent'! Personally, I'm glad I took the test and had no trouble passing it on the first try. It gave me self-confidence and reassurance that I'd be willing to continue preparing taxes beyond the 45 years I have done so already. No, I am not an EA, CPA or attorney (just a mere SE RTRP) but I file over 800 returns a year and have never had any problems with the IRS. The annual $63.00 fee hasn't sent me into bankruptcy yet either and if anyone can't afford it perhaps they need to look for another line of business.

Posted by: domaco | November 6, 2013 4:32 PM

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Personally, I have been doing taxes since 1965 and I think the IRS should have been regulating preparers since the beginning. Too many "mom and pop" tax preparers base their fees on a percentage of their clients' refunds. This is nothing but an incentive to inflate refunds, especially through the EIC program. I have consistently done due diligence since EIC was instituted (and I benefited from the program because I was a single mother making minimum wage). Every time a new program to help the people who need the most help is implemented, the takers find a way to exploit it. Thus, the "rent-a-kid" program. Buck up, prove yourself as a citizen of the greatest country on earth and do your duty. Nough said.

Posted by: wybell | November 6, 2013 4:23 PM

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Excellent presentation. I agree that the IRS will lose on the appeal, but I wonder if the IRS will seek legislative authority to implement such regulation.

Posted by: judas_priest | November 6, 2013 2:08 PM

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Mr. Flach gives a great chronology and makes a compelling argument.

Posted by: batarista1 | November 6, 2013 12:08 PM

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