Update July 18, 2014
Mixed news for registered tax return preparers...those who passed IRS’ test,
took the requisite continuing education courses and got an official certificate
from the agency before a court ruled that the regulatory framework was not valid.
They won’t appear in IRS’ upcoming public database of preparers. Only CPAs,
attorneys, enrolled agents and unenrolled preparers who fulfill the requirements
of the new IRS voluntary program will be listed. The database will debut next year.
But they will get a break to satisfy the voluntary certification standards,
IRS says. They are exempt from the six-hour refresher course and quiz on tax law,
and need only take eight hours of continuing education courses to qualify for 2014
and 15 hours next year. So they at least receive some benefit for passing the old test.
Other unenrolled preparers needn’t pass and take the refresher course to get the voluntary certification, either: Preparers credentialed in Calif. and Ore.,
and those certified by the Accreditation Council for Accountancy and Taxation
as an accredited business accountant/advisor or an accredited tax preparer.
Anyone who passed the first part of the enrolled agent’s examination in 2013 or 2014.
And some reviewers and instructors in IRS’ voluntary income tax assistance program.
Meanwhile, IRS’ voluntary credential for preparers faces a court challenge. The American Institute of Certified Public Accountants recently filed a lawsuit
claiming that the new program is an impermissible end run around the court decision
that invalidated the registered tax return preparer rules. It also alleges that IRS
didn’t give stakeholders ample time to comment before rolling out the program.
Update July 03, 2014
It’s full speed ahead for IRS’ voluntary credential for unenrolled preparers.
Despite complaints from groups representing licensed preparers, the agency
has officially unveiled its plan to offer a voluntary annual filing season certification
to return preparers who aren’t attorneys, CPAs or enrolled agents. Under the program,
18 hours of continuing education would be required each year...two hours on ethics,
10 hours of federal tax law topics and a six-hour refresher course on federal tax law.
that includes a 100-question quiz.
Test takers must score 70% or higher to pass.
Preparers in states that have their own testing requirements, such as Calif. and Ore.,
as well as preparers who previously passed IRS’ registered tax return preparer exam,
can skip the refresher course and test and take three hours of tax law updates instead.
The program will be in place for the 2015 filing season, but only 11 hours
would need to be earned by the end of 2014 to qualify for 2015: Two hours on ethics,
three hours of federal tax law topics and the six-hour refresher course with the quiz.
Applicants exempt from the refresher course also have more lenient requirements
for 2014: Three hours of tax updates, three hours of tax topics and two on ethics.
Bad news for unenrolled preparers who don’t opt into IRS’ voluntary program: They’ll lose the ability to represent their clients in audits or claims for refund
on returns that they prepare and sign after 2015. Only those in the voluntary program
will have that right. But they can’t assist clients before IRS Appeals or collections.
The Service will have a public database of preparers ready by early 2015.
It will list preparers who have a preparer tax identification number and are CPAs,
attorneys or enrolled agents plus those who participate in the voluntary program.
The database will also list the professional credentials of each type of tax pro.
IRS must prove fraud to penalize preparers for aiding tax understatements,
an appeals court says. If the agency does not show clear and convincing evidence
that a preparer’s actions resulted in an understatement of a client’s tax liability,
the penalty doesn’t apply. The aiding-and-abetting penalty is steep...$1,000 per 1040
and $10,000 for each corporate return. In this case, the Service was seeking $148,000
from a preparer but was not able to prove fraudulent intent (Carlson, 11th Cir.).
The issue may end up in the Supreme Court. Two other appeals courts say
that IRS can prevail if the preponderance of evidence shows a willful understatement.
Update June 06, 2014
IRS’ voluntary credential idea for unenrolled preparers is getting lots of flak
from organizations representing CPAs, enrolled agents and other tax pros.
They’re troubled by the speed at which the Service is moving on the issue...the agency
hopes to implement the scheme by Jan. 2015, in time for next year’s filing season.
And the groups think the requirements for qualifying for the credential are too lax:
Taking 15 hours of yearly continuing education and passing a quiz to get course credit.
Don’t expect IRS to derail the plan, but odds favor changes or possibly a delay.
IRS eases sanctions on tax professionals whom it previously disciplined.
They can get preparer tax ID numbers again and prepare returns for pay.
But they’re still not allowed to represent clients before the Revenue Service in audits,
conferences, appeals and the like. This relief applies to individuals who were disbarred
or suspended between Aug. 2, 2011, and Feb. 11, 2014, a result of the court ruling
that nixed the Service’s regulatory scheme for unenrolled preparers. The court said
that preparing returns isn’t covered by rules regulating practice before the agency.
Update May 23, 2014
The Supreme Court won’t weigh in on IRS rules for unenrolled preparers.
The Revenue Service has decided against a Supreme Court appeal of a case
that invalidated its regulations requiring preparers other than enrolled agents, CPAs
or lawyers to pass a competency test and take annual continuing education courses.
The Supreme Court won’t weigh in on IRS rules for unenrolled preparers.
Another regulation option being bandied about is a long shot. A House bill
would make the Consumer Financial Protection Bureau responsible for regulating them.
This novel idea takes the power out of IRS’ hands, but chances of passage are slim.
So a voluntary credential is the likely result. The Service would like to implement this idea in time for next year’s filing season.
Update Feb 28, 2014
The Service may lack the authority to regulate unenrolled preparers...
But states still have the right to police them. Four states currently do so:
Calif., Md., N.Y. and Ore. The last has a set of tough rules that have been in effect
for years, requiring preparers who aren’t CPAs, lawyers or enrolled agents to register,
pass a test and take classes. Calif. requires registration and continuing education
for unenrolled preparers, who also must be bonded by an insurance agent or surety.
The laws in Md. and N.Y. are much more recent, requiring only registration for 2014.
Testing is around the corner in both states, and N.Y. will require continuing education.
In the coming years, more states will jump on the regulation bandwagon.
Update Feb 14, 2014
IRS lacks the power to regulate unenrolled preparers, an Appeals Court says.
It upholds a lower court’s ruling voiding the Service’s regulatory scheme
for return preparers who aren’t attorneys, CPAs or enrolled agents. Under those rules,
unenrolled preparers were required to register with IRS, pass a competency exam
and take continuing education. In the Court’s view, the agency overstepped its bounds.
Only the preparer registration requirement remains intact now (Loving, D.C. Cir.). The Service is mulling a Supreme Court appeal, but the odds appear long
that the High Court would take the case. The Appeals Court panel ruled unanimously
against the regulations, and there is no split in the circuits that has to be resolved.
Update May 16, 2013
Fee amounts collected for scheduled registered tax return preparer test appointments canceled due to the court ordered injunction are being refunded. Additionally, fees collected from return preparers who tested on or after January 18, 2013, the date the test was enjoined, are also being refunded. No additional refund or reimbursement requests related to registered tax return preparer regulation are being provided or considered at this time. E-mail notifications will be provided to those receiving refunds to explain the process.
No action is necessary to receive the refund. A credit for the test fee will automatically be made to the account used to pay the fee. It is anticipated that all refunds will be processed by July 19, 2013.
Update March 28, 2013
We remain confident in our legal authority and remain committed to protecting taxpayers through implementing reasonable standards in this area. Our appeal of the original district court opinion is being actively pursued.
The IRS continues to have confidence in the scope of its authority to administer this program and is working with the Department of Justice to address all options, including a planned appeal.
Update Jan 22, 2013
On Friday, Jan. 18, 2013, the United States District Court for the District of Columbia enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not required to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.
Please continue to check this site for additional information as it becomes available.
On Friday, Feb. 1, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN). Consistent with this modification, the IRS has reopened the online PTIN system.