In 2010, the Internal Revenue Service (IRS) began implementing its plan to increase the integrity of the tax preparation industry by registering and regulating all paid tax return preparers. This plan consisted of the following main components:
- Require all tax return preparers to register and obtain a preparer tax identification number (PTIN);
- Require all registered preparers who were not previously bound by Treasury Department Circular 230 Regulations Governing Practice Before the Internal Revenue Service to become subject to these regulations;
- Initiate a process for testing tax return preparers; and
- Require a course of continuing education for tax return preparers.
The IRS recently issued final regulations to modify the Treasury Department Circular 230 rules of practice, mainly to encompass the new registered tax return preparer designation.
Canadian paid preparers of US tax returns who are not US attorneys or US certified public accountants (CPAs) will become part of this new class of tax return preparers, and will be subject to the rules of practice contained in this Circular. US attorneys and CPAs and certain others were already subject to Circular 230 regulations. Canadian professionals who have applied for a PTIN and will become registered tax return preparers should familiarize themselves with the revised Circular 230 regulations.
The next two components of the plan, standardized testing and continuing education are still at the development stage. Transition guidance was announced in Notice 2011-6, Implementation of Rules Governing Tax Return Preparers, issued December 30, 2010. In particular, as an interim rule, there is no continuing education requirement for registered tax return preparers who obtain a provisional PTIN during the first year of registration, which commenced on September 30, 2010.
This notice also states that individuals who are supervised by a US attorney, US CPA, enrolled agent, enrolled retirement agent or enrolled actuary authorized to practice before the IRS will not be subject to the testing requirement provided that they do not sign tax returns or represent to the IRS or the general public that they are registered tax return preparers, and provided that the supervising law firm or CPA firm is authorized to practice law or be certified as a public accounting firm in the US. Given this final restriction, Canadian resident supervised tax preparers may not be exempt from testing.
The IRS released Notice 2011-48, Registered Tax Return Preparer Competency Exam on June 7, 2011. This notice invites public comments on the content and administration of this exam. The deadline for public comments was July 7, 2011. As previously announced in Notice 2011-6, this exam will initially focus on personal tax return preparation only, and preparers who do not prepare personal tax returns will therefore initially be exempt from the testing and continuing education requirements.
Fore more information, please visit the IRS reports on developments at the Tax Professionals section of the IRS website.