Preparer Registration - Surprise!

The new preparer registration rules are making for in interesting spring and summer. We're still waiting on a lot of details like cost, who will administer the test, what other info will be needed for the PTIN, stuff like that. However, all kinds of little nuggets are showing up in webinars and press releases. A BNA article brings up 2 of the nuggets courtesy of Director of the Office of Professional Responsibility, Karen Hawkins.

The first one is more of a clarification of how the new PTIN/testing rules will apply to "non-signing" employees. In some firms, the basic data entry/interview is done by one person and the return is finished and signed by a second. A webinar I saw recently gave a registration pass to someone who just enters the W-2 and info into a computer. If the preliminary contact does more. like interview or interpret taxpayer info, then they will be required to have a PTIN. According the Hawkins; “The goal is to get everyone … who has some sort of face-to-face contact with the taxpayer, who is advising on positions, extracting information where they might be making some adjustments, … those kinds of people, even if they are not the ultimate signer of the return,” to have a PTIN.

The big "gotcha" is the decision to bring all registered preparers under Circular 230. This has been part of the thinking since the report was released in January. Circular 230 is the IRS rulebook which guides those of us who "practice" before the IRS. The Enrolled Agents, CPAs, lawyers and others who have qualified for extra privileges in representing clients in IRS issues. For example, I can directly negotiate a collection issue between a client and the IRS  (with a proper power of attorney). But a non-enrolled preparer can advise a client how to handle a collection issue but they can't do it for them even with a POA. The extra rights come with extra responsibilities and regulations. A Circular 230 practitioner can be suspended or even disbarred from IRS practice for violation of the rules. But they can still prepare tax returns. That is about to change.

The rules expected to be released this summer will change the definition of "practice' before the IRS and that means who is covered by Circular 230 regulations according to Hawkins. Tax preparation will become a part of "practice" and that means anyone who prepares returns will be covered by the rules. This also means they become subject to suspension and disbarment for not following the rules. And once tax preparation is considered a part of "practice" before the IRS, practitioners who are suspended or disbarred need to find a new job. They can no longer "fallback" to preparing tax returns because preparing returns is now part of what they are suspended/disbarred from doing.

The new rules aren't finalized yet but it sounds like the IRS has thought these through and it is committed to giving themselves a strong tool to keep tax preparers in line.

Surprise!