New Tax Preparer Rules for 2012 Returns Set to Kick in

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A vast majority of taxpayers file their tax returns through a tax preparer.
This means that the bulk of the work reviewed by the IRS is done by the preparers.
For this reason, the IRS has been increasing its monitoring of these preparers.
This move by the IRS to increase its surveillance on tax preparers started early in 2011.
The move is targeted at ensuring that the tax preparers are well competent to handle issues relating to taxes.
For the 2012 tax returns, preparers will be required to meet certain requirements in order to legally provide their services in line with the IRS move.
These requirements are explained below:
  • All tax preparers will now require to register for a Preparer Tax Identification Number (PTIN) and get the number before practicing.
    For Certified Public Accountants (CPAs), tax attorneys, and Enrolled Agents (EAs), they may qualify for the PTIN without further requirements as long as they do not have any outstanding issues with the tax authority body.
    The IRS is confident that these professionals are well skilled to handle matters of tax preparation without further training or testing.
  • For those who are not in any of these professional groups, they will need to sit through a tax competence test before getting the PTIN.
    The competence test will check a preparer's knowledge and understanding of the tax process and various expectations of the IRS on the preparers.
    This test will cost the tax preparers $116.
  • Tax preparers (those who require to sit through the competence test) who plan to practice in 2012 will need to pass the competence test by December 31, 2011.
    The test is available online on the IRS website.
  • Besides passing this competence test, these preparers who do not qualify under the professionals category will also need to take 15 hours of continuous education every year to ensure that they are brought to speed on any new tax rules that will have come up within the year.
  • The PTIN license will be renewable annually and a renewal fee will be levied annually upon renewal.
The testing process is yet to be streamlined, as those who have already done the test are yet to receive the results.
Apparently, the IRS is reviewing the results of those who have done the test to determine the pass mark and to gauge the level of competence in the industry.
Once the review process is done, the IRS will release results immediately upon completion of the test.
For the taxpayer, you will now be required to ensure that your tax preparer is compliant and has the current year's PTIN.
A taxpayer is also expected to ensure that a preparer signs the tax return or file returns electronically on the taxpayer's behalf.
Even with a certified tax preparer, it is also important for every taxpayer to ensure that he or she reviews the tax return before signing or submitting, as the taxpayer, and not the tax preparer, is responsible for the information remitted in the tax return forms.
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