IRS Recommends New Requirements for Tax Return Preparers

On January 4, the Internal Revenue Service (IRS) recommended new enforcement and education requirements for tax return preparers. Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.

In its announcement, the IRS recommended a number of new measures:

• Requiring virtually all paid tax return preparers to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment, and business tax returns and that the tax due on those returns has been paid.
• Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
• Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents, and others who are already subject to continuing education requirements.
• Extending the ethical rules found in Treasury Department Circular 230 to all paid preparers. Currently, these rules only apply to attorneys, CPAs and enrolled agents who practice before the IRS. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.

The IRS’s recent review of the tax return preparation industry and its recommendations are highlighted in the full IRS report.