The National Society of Accountants is recommending that tax preparers not rush to sign up for the Internal Revenue Service’s upcoming tax preparation compliance exams.
The IRS recently announced that it would begin scheduling the exams this week as the second phase of its efforts to regulate the tax preparation profession (see IRS Begins Scheduling Tax Preparer Competency Tests). The NSA said Thursday that preparers should wait until after April 15, 2012 to take the exam, because at that point the exam will be updated to reflect the 2011 IRS Tax Code. Until then, it is based on the 2010 Tax Code.
“If you prepare a number of Form 1040 returns during tax season you will also be taking a cram course on the tax content in the exam,” said NSA executive vice president John Ams in a statement. “So why not take the exam right after that tax season ‘cram course?’”
The exam is two and a half hours long and includes 120 questions, which will be in both multiple choice and true/false format. Form 1040, the 1040 instructions, and Pub 17 will be available online at the test center only (tax preparers cannot bring their own copy with them). A handlheld calculator will also be provided.
Pass/fail information will be available immediately, except for the first 2,400 exam takers. The IRS will use these first exams to validate the test questions, so results will not be available for some weeks following the test.
Beginning Dec. 16, 2011, the NSA also plans to offer a Web-based tutorial to help preparers learn what they need to know to take this type of examination.
The IRS has also posted a video on “What to Expect on Test Day” at www.youtube.com/watch?v=Q5FbshBloCw and an online sample test to demonstrate how an online test works at www.prometric.com/clientfiles/irs/irsrp/index.htm.
Tax preparers have until Dec. 31, 2013 to successfully complete the IRS’s competency exam. NSA already offers a study course that can serve as a primary study guide or as a supplement to information preparers may already have. The course is available for purchase at www.nsacct.org.
The IRS Preparer Office is interested in whether preparers know the Tax Code rather than how to merely input information into tax software, the NSA noted.
“Some NSA members who are older and have been tax professionals for some years are upset about the exam, and understandably so,” said Ams. “However, as a group, they are likely better equipped to take the exam than others. Why? Because they started preparing returns before tax software claimed to make everyone a tax expert. Many started by doing 1040s by hand and probably know more about deductions, credits, and limits than they care to admit. Moreover, they know where a particular number is supposed to be entered on a return and whether that number should be adjusted based on limits or other adjustments required by the Code.”
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