IRS Issues Guidance to Further Implement Return Preparer Oversight

WASHINGTON — The Internal Revenue Service today provided additional clarification for
tax return preparers about when to renew their preparer tax identification numbers (PTINs),
how suitability testing will be conducted, and when the continuing education requirement
will begin.

The IRS today released Notice 2011-80, which provides that PTINs must now be renewed
on a calendar year basis. All PTIN holders must renew their numbers using the online PTIN
application or paper Form W-12 and pay the required fee ($64.25 for 2012) after Oct. 15
and before Jan. 1 annually.

The return preparer initiative requires anyone who is paid to prepare all or substantially
all of any federal tax return or claim for refund to register with the IRS and obtain a PTIN.
Certain preparers also must pass a competency examination, undergo a suitability check
and complete continuing education courses annually. The IRS will designate individuals
who meet these requirements as a Registered Tax Return Preparer.

Individuals designated as a Registered Tax Return Preparer will be authorized to prepare
federal tax returns and claims for refunds and to represent their clients during an IRS
examination of a tax return or claim for refund that the individual signed as the paid tax
return preparer.

The notice also clarifies a number of other issues.

The IRS has been issuing provisional PTINs to individuals who are not attorneys, certified
public accountants, or enrolled agents to enable them to prepare tax returns prior to
meeting competency testing and suitability requirements because the programs have not
begun. The IRS will continue issuing provisional PTINs at least through April 18, 2012.
Once the IRS stops issuing provisional PTINs, tax return preparers who are required to
complete the competency test or suitability requirements must complete these requirements
successfully prior to obtaining a PTIN.

The notice also provides that the 15-hour continuing education requirement for certain tax
return preparers will take effect starting in 2012. Registered Tax Return Preparers and
individuals required to pass the Registered Tax Return Preparer competency examination
before Dec. 31, 2013, must complete the 15-hour requirement prior to renewing their PTINs
for 2013 and subsequent years.

The notice also explains that certain tax return preparers who must pass a suitability check
will have to provide their fingerprints so that a Federal Bureau of Investigation database
search can be conducted. Generally, the fingerprint requirement will affect those preparers
who currently have provisional PTINs.

Under the current proposed regulations any participant in the PTIN, acceptance agent,
or authorized e-file provider programs who resides and is employed outside of the United
States will not have to be fingerprinted to participate in these programs. Such persons,
however, must comply with all other elements of the suitability check. In addition, the
Treasury Department and the IRS continue to study what additional requirements should
apply to such persons. Any additional requirements would be set forth in future guidance.

Attorneys, certified public accountants, enrolled agents, enrolled retirement plan agent and
enrolled actuaries also are expected to be exempt from the fingerprinting requirement at
this time. However, these individuals also must answer all the suitability questions asked
on the PTIN application, such as whether they have been convicted of a felony in the
previous 10 years.

Individuals participating in the PTIN, acceptance agent, or authorized e-file provider
programs also are required to meet any other requirements of the programs in which they
are participating.

The IRS is working with third-party vendors who will collect and process the fingerprints.

Proposed Regulations Related to User Fees

The IRS also published proposed regulations today (REG-116284-11) that would establish
user fees for fingerprinting and taking the competency examination. As proposed, the IRS
portion of the fingerprinting fee would be $33, and the IRS portion of the testing fee would
be $27. These user fees are in addition to any fees charged by the third-party vendors
administering the programs. The fees to be charged by third-party vendors are not being
announced at this time, but the total fees, including the IRS user fees, are expected to be
between $60 and $90 for fingerprinting and $100 and $125 for testing.

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