David Williams, Director of the IRS Return Preparer Office, presented a session at the Dallas IRS Tax Forum this summer subtitled “Rumor Control” due to the misinformation surrounding Registered Tax Return Preparers (RTRPs). Given the hostility and apparent worry many tax professionals were feeling about the registration process, Williams started the session by clarifying that it is an entry-level test.
“(It is) not a test to put people out of the business of preparing tax returns,” Williams said. “We think there are a lot of people still not registered or have or even know what a PTIN (Preparer Tax Identification Number) is.”
Williams also addressed the fact that many organizations are offering practice tests supposedly based on the official test. Williams revealed that the competency test is still being created and a passing threshold has not yet been designated but recognized vendor’s efforts to transcend the barrier of time.
“Most people have anxiety about testing. The tests available today are from vendors that are clairvoyant,” Williams joked.
The minimal competency is based on IRS publication 17. Continuing education (CE) is planned for 2012 after determining how to register the vendors offering the CE. Required, will be a yearly 10 hours of tax law, three hours of updates and two hours of ethics. The CE registration vendor will be required to inform the IRS who has taken which course according to their PTIN.
Recent statistics reveal that there are over 720,000 registered preparers. Of these preparers, 62% are not attorneys, CPAs or EAs. There may be as many as 900,000 RTRPs once mandated registration has taken effect. Of preparers, as many as 100,000 have had compliance problems and 50,000 may have been felons in the last 10 years, which could exclude them from the program.
Unable to be counted, ghost preparers are tax preparers that are not working for CPAs or have any kind of certification, registration or most importantly a PTIN. PTINs were secured in 15 minutes online, according to Williams.
The question of why to pay a fee of $64.25 when I already had a PTIN is often asked.
“Because the program is funded completely by these fees, which includes public awareness,” Williams said. “You have rights as a circular 230 responsible practitioner. The fee could come down in subsequent years. Due process rights are now available, so if your rights [to practice] are removed, you can appeal and eventually take the case to court. You have the right to be heard, to tell the rest of the story; this is also part of the fee.”
Williams illustrated the need to authenticate the preparer so it could be verified that the applicant was who they said they were. This push for authentication was accompanied by 100,000 letters that went out to applicants who did not use the actual PTIN for various reasons. The PTIN will be an annual application that is not pro-rated if applied for in the middle of the year.
The enormity of registering the nation’s tax practitioners has dictated how the matter would be undertaken. Williams described the IRS’s systematic approach to this daunting task.
“We don’t have the resources to start a massive enforcement campaign, “Williams added. “We are focusing on 1040 preparers. There are several opportunities for improvement.
Attorneys, CPAs and EAs only need to obtain a PTIN each year because they already have professional qualifications.
“In the administrative procedures act you cannot place more barriers before them to practice because they are already prepared,” Williams explained. “Fingerprinting is needed for all others. We had a long dialog with CPAs and determined that a supervised preparer does not need to be registered. You must work for a firm that is owned by an Attorney, CPA, or EA. You must be supervised by an Attorney, CPA or EA. They have high credentials and authorizations. If we determined that (it) is different in later years, we can change it. We may move to an every 3 year PTIN renewal”
Fingerprinting will be collected by two companies which tax practitioners can schedule appointments with online. One such vendor will have fingerprinting at 430 UPS offices. The fingerprinting will be sent to the FBI who will check for any felony convictions in the last ten years. The FBI will charge $17 per fingerprint but that and the testing are a one-time event. The companies will have to hire 4000 people to administer the fingerprinting services, all of which will have to be background checked to prevent the risk of identity theft.
“This is a growth industry worldwide since 9-11,” Williams stated.
Williams expects to have a referral database for preparers to refer ghost preparers in the near future. Penalties of $50 per return will be issued to ghost preparers. The Return Preparer Office will administer everything but situations regarding ethics. Circular 230 will govern ethics based on the judgment of the Office of Professional Responsibility. The determination will be made on an office-by-office basis.
“Nobody is a registered tax return preparer until after they have been tested. Then you can present yourself as an RTRP,” Williams warned. “Ghost preparers, who are not registered, can be located by questioning the taxpayers when the return appears to be assisted without a provided PTIN.”
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