An IRS official repeatedly reassured an audience of tax preparers that the agency isn’t aiming to take away their livelihoods or weed out people when its new registration, testing, education and e-file requirements take effect next tax season.

Speaking at the IRS Tax Forum in New York on Thursday, David Williams, the IRS’s director of electronic tax administration and refundable credits, said the first requirement for practitioners will be getting a preparer tax identification number, or PTIN, before they sign their first return next tax season. That’s the only thing preparers will need for next filing season, though some of the other requirements will start to kick in a little later, specifically in June when the testing requirement starts (see IRS Plans Tax Preparer IDs and Testing).

PTINs will be mandatory for all paid tax preparers. In order to get a PTIN, preparers will be able to apply online or refresh their existing PTIN. PTIN sign-up begins in September.

Applicants will be asked if they have met their own tax-filing requirements or if they owe any money to the IRS. Owing money to the IRS is not a deal-breaker, however. “If you owe money and you’ve made provision to pay, then you are compliant,” said Williams.

If the preparer is not compliant, they will have a space where they can explain the circumstances.

The second question they will have to answer will be whether they have ever been convicted of any felony. Again, a felony conviction is not necessarily a deal breaker in the eyes of the IRS. PTIN applicants will again have room on the application to explain the circumstances. Williams noted that if they had a youthful indiscretion and have a DUI conviction on their records, they could still qualify to receive a PTIN from the IRS.

“In some states, you can be convicted of a felony if your dog takes a poop on the sidewalk,” Williams said. “But if you were convicted of armed robbery last year, we want to know about it.”

Regardless of the circumstances, tax preparers will still get what’s known as a provisional PTIN. The IRS offers a “due process” where they can make their case for why they should get an official registered PTIN for the year. “We don’t want to take away your livelihood,” Williams emphasized. He noted that the service has heard from many preparers who said their income dried up last year, which would explain why many tax preparers may owe some unpaid taxes of their own this year. But if a tax preparer was convicted of an armed robbery, chances are they’re not going to get approved by the IRS.

The IRS will at first only issue PTINs for one year at a time. The agency is still trying to decide whether to have a three-year requirement.

The testing requirement starts next June after the traditional tax season ends. The tests will include the 1040, the Schedule C-EZ, and perhaps a small business return. Williams cautioned that the IRS’s testing regime has not been finalized yet.

“We’re not trying to weed people out,” he reassured the audience. “Our goal is a minimum level of competency.”

Tests will be given at multiple locations around the country and will be conducted online. However, tax preparers will not be permitted to bring along a laptop loaded with tax software to the testing location.

“We want people to be able to explain why someone didn’t qualify for an EITC or is subject to the alternative minimum tax,” said Williams. “You can’t say it’s because the tax software said so.”

Tax preparers will need to be able to explain their answers and demonstrate at least a minimal level of competency. If they flunk the test, they will have multiple opportunities to retake it until they pass. Once they obtain their PTIN, they will have until the end of 2013 to pass the exam.

Williams noted that many people have test anxiety, but cautioned they should not wait until 2013 to take the test so they will have enough time to take and, if necessary, retake the exam before the end of the year. Preparers who wait too long will not get a PTIN until they have first passed the exam. After testing begins, new PTIN applicants who are not attorneys, CPAs or enrolled agents will be required to pass the competency test prior to obtaining a PTIN.

“If you’re already a CPA, enrolled agent or an attorney, you will need to apply for a PTIN, but you won’t need to be tested or have CE,” said Williams. “But you already have CPE requirements anyway [under Circular 230].”

It will probably cost less than $70 to obtain a PTIN, Williams noted. Last month, the IRS proposed a $50 fee, along with a lower but still undetermined fee that will be charged by whichever third-party vendor is eventually chosen to operate the online system (see IRS Proposes $50 Fee for Tax Preparer Registration). The fee is intended to cover the cost of the program, especially the due process requirements for preparers who face obstacles in getting a PTIN.

Williams went on to explain the continuing education requirements, noting that tax preparers will be required to take 15 hours per year of CE, including three hours of federal tax law updates, two hours of ethics, and 10 hours of federal tax law. The IRS is not yet sure how it will structure the education requirement, but if it notices a preparer filing a lot of small business returns, it may suggest the preparer take a CE course on that subject. Only IRS-approved CE programs will be considered for CE credit.

Williams noted that knowledgeable preparers may not only want to take CE courses, but give them to other preparers. “We’re creating a new market for providing continuing education,” he said. “In the off season, you may want to consider providing continuing education.”

The IRS, however, is warning tax preparers to beware of vendors offering CPE credits for preparing for the test. Test preparation is not eligible for CPE credit.

Once a preparer has been registered with the IRS, they will get a certificate that they can display on their wall. However, the IRS has heard about a little thing known as Adobe Photoshop, and it wants to ensure that unscrupulous tax preparers don’t just start Photoshopping their own IRS certificates. Therefore, it plans to create an online searchable database of tax preparers that taxpayers will be able to consult to make sure their preparer has passed muster with the IRS. However, the IRS probably will need some time to build the database, so there is no firm date for when it will be ready. The IRS wants to have a system in place that will be responsive if a tax preparer has a problem with their listing in the database.

Williams went on to discuss another timely topic: the e-file mandate. Legislation mandating electronic filing for tax preparers was enacted last November. For 2011, tax preparers who prepare 100 or more returns must e-file. Beginning in 2012, tax preparers who prepare more than 10 returns must e-file. The IRS plans to issue additional guidance on the e-file mandate later this year.

Williams noted there will be a waiver process for clients who object to filing electronically, as some have been known to do. In addition, some forms simply cannot be filed electronically right now, such as the supporting paperwork to document eligibility for the First-Time Homebuyer Credit. Tax preparers will be able to put the printed waiver on top of the paper return when they mail it to the IRS.

As part of the IRS’s ongoing efforts at modernizing its electronic filing system, tax preparers will eventually be able to attach PDF files to the tax returns they file, Williams noted.

To keep up to date with the latest announcements from the agency, tax preparers who are also Twitter users can now follow the IRS on Twitter at

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