With the IRS hearings scheduled for today on the proposed Circular 230 regulations on education and testing of tax return preparers, its becoming somewhat confusing to remember just where we are in the process of registering preparers.
Heres what we know so far. After Dec. 31, 2010, all tax return preparers will need to sign the return and include their Preparer Tax Identification Number.
On Sept. 28, the IRS issued final regulations on PTINs. With apologies for the double negative, the new rules exclude individuals who are not nonsigning tax return preparers. In addition, the final regs do not provide an exemption for CPA firm employees, such as interns, from the PTIN requirements.
However, the IRS noted that attorneys, CPAs and enrolled agents would not be subject to additional testing or continuing education requirements in order to obtain a PTIN. The IRS stated that it has under serious consideration the issue of extending similar treatment to a discrete category of people who engage in return preparation under the supervision of someone else. According to the IRS, they could include, for example, some employees who prepare all or substantially all of the return and work in certain professional firms under the supervision of an attorney, CPA or enrolled agent.
The IRS gave two examples of student interns working for a preparer. In the first example, the intern performs data entry from the tax organizer that clients fill out, and assembles the documents. Interns may call clients to gather information but they are not allowed to provide advice or answer tax law questions. In this case, the IRS said, the interns are not tax return preparers and are not required to have a PTIN.
In the second case, the interns are allowed to work with clients who have very simple tax situations, and prepare the Form 1040-EZ. In this case, the interns are tax return preparers and are required to have a PTIN, whether or not they sign the returns.
The American Institute of CPAs urged the IRS to reconsider its decision to require student interns to obtain PTINs in this and other situations, as well as be exempt from the proposed testing and continuing education requirements.
The AICPA as well as the National Association of Enrolled Agents and the National Society of Accountants provided written comments expressing concern about the requirement in the proposed regulations that prior approval from the Office of Professional Responsibility be obtained for each continuing education program.
We are concerned that the proposed section relating to the qualification of continuing education programs and continuing education providers fails to recognize both the volume of continuing education courses that will require IRS approval and the timeliness required in the approval process, the AICPA said. It recommended that programs offered by continuing education providers such as the AICPA and NASBAs National Registry of CPE Sponsors be exempt from the requirement.
Inclusion of these providers in the requirements of [the proposed section] would only add to the Services burden in administration of the program, impede the timely offering of continuing education programs and increase the cost of tax preparation to taxpayers, it stated.
"Requiring pre-approval of each program creates a substantial burden not only for OPR but also for providers, the NAEA agreed. Further, we are concerned that the practical implementation realities endanger the overall integrity of the program."
The proposed changes carry a number of logistical challenges as well, the NAEA commented, noting that planning far enough in advance to acquire pre-approval may stretch the resources of providers. Those who plan ahead will need to assume that approval will be granted, and may be left in the lurch if the education provider does not follow through the process with OPR, it observed.
Given the current uncertainty over the tax landscape for next year, this rings true. The recently enacted small business provisions have hardly had time to be digested, and the AMT patch, estate tax, and tax rates themselves have yet to be addressed.
The NSA noted that changes to the tax law have recently been enacted in the month or two prior to the beginning of each tax season.
In recent years, Congress has approved AMT legislation as late as the middle of December, it commented. In such an event, how would there be time to receive approval from OPR in time for the course to be offered before the beginning of tax season? NSA does not believe that retroactive approval would be appropriate since many RTRPs [registered tax return preparers] and EAs attend these courses to ensure they have sufficient continuing education credits to qualify for renewal and would want to be assured that a course or program qualifies for credit prior to attending the course.
For CPAs, the real question is whether those who work for the same firm under their supervision will be exempted from the testing and education requirements. In a very short time, this should all be made clear.
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