Federal Judge Strikes Down IRS RTRP Requirements

Last week, a federal judge ruled against the U.S. Internal Revenue Service (IRS) on the agency's efforts to regulate the tax preparation profession.

Judge James Boasberg found that the text of the relevant statute does not support the IRS's claim to its authority to regulate tax return preparers. The ruling does not affect the IRS's Preparer Tax Identification Number (PTIN) requirements.

While CPAs (along with Enrolled Agents and tax attorneys) were exempt from the requirements, the ruling is a major blow to the IRS's Registered Tax Return Preparer (RTRP) requirements. Do you think the regulatory oversight is necessary?

IRS Form 14157: Anonymity Issues?

U.S. Internal Revenue Service (IRS) Form 14157 (PDF), Complaint: Tax Return Preparer, allows taxpayers to report a tax return preparer or tax prep firm for illegal behavior. The form can be submitted anonymously, which critics say increases the potential for abuse. (The form does include an area where taxpayers can include contact information to allow the IRS to follow up with them, but the field is not required.)
 
Tax preparer Trish McIntire, an Enrolled Agent (EA), raises the following questions:

• How can a preparer respond to an anonymous complaint?
• Will the IRS initiate an investigation whenever a Form 14157 is filed, or will it take more than one complaint?
• When will a preparer be notified that a complaint has been filed against him or her?
• If enough Forms 14157 are filed, will the IRS assume there is a real problem?

It's worth noting that Form 14157 has its uses for tax preparers as well — it's the form preparers can use to report that someone else is using their Preparer Tax Identification Number (PTIN) to prepare returns. We should also point out that the VSCPA allows anonymous complaints against CPAs, as do the Virginia Board of Accountancy (VBOA) and the American Institute of CPAs (AICPA). Read the VSCPA's article on the form to learn more about which forms are made public.

What do you think? Does the usefulness of Form 14157 trump the potential for abuse? What other potential problems could the form create?

IRS Issues Specifications for Tax Preparer Exam

On Tuesday, the U.S. Internal Revenue Service (IRS) released the specifications (PDF) for the competency test that individuals must pass to become a Registered Tax Return Preparer, part of an ongoing agency effort to enhance oversight of the tax preparation industry.

The IRS’s oversight efforts began with the requirement that all paid tax return preparers, including CPAs, register with the agency and receive a Preparer Tax Identification Number (PTIN) for this tax season.

CPAs, attorneys and enrolled agents, along with non-signing employees of those groups, are exempt from the testing and education requirements under Circular 230. While the testing requirements won't directly affect Virginia CPAs, will the test have other effects for VSCPA members? What do you think?

IRS Proposes PTIN Registration Fees

Last week, the Internal Revenue Service (IRS) released its proposed regulations to establish fees for those applying for preparer tax identification numbers (PTIN). This is the next step in the IRS's efforts to increase oversight of federal tax preparation.

Here's what CPAs must know: Beginning in 2011, all CPAs and other paid tax preparers must either re-register their PTINs or obtain a PTIN if they sign tax returns. CPAs, attorneys and enrolled agents all must renew their registrations every three years, but are exempt from testing, criminal background checks and continuing education requirements.

According to the IRS, the proposed $50 fee would cover technology costs and compliance and outreach efforts associated with the new PTIN program. An additional, smaller fee will be added by the third-party vendor chosen to operate the online registration system.

The PTIN proposal is not without its controversy. The CPA profession finds the requirement of PTINs for non-signing preparers problematic, as there are many employees at CPA firms who would fall into this category and would thus be subject to the testing and education requirements from which CPAs are exempt.

Read the VSCPA's July 1, 2010, letter to Virginia's federal representatives and senators for more on the Society's position.

The comment period for the IRS fee proposal ends August 23, 2010. Contact VSCPA Government Affairs Director Emily Walker at (804) 612-9428 if you have questions or comments.