THE TEST IS HERE!

The first day for scheduling appointments to take the Registered Tax Return Preparer competency test is Monday, November 28.  The test can be scheduled through your online PTIN account http://www.irs.gov/ptin.  If you do not have a PTIN account, you can call 1-855-477-3926.

The test will be administered at Prometric locations throughout the U.S.  The number of locations at which the test can be taken will increase as time goes on.

The fee for the exam is $116. 

The first set of test takers will receive their results in two to six weeks.

Click here to read a fact sheet the IRS has published. http://www.irs.gov/newsroom/article/0,,id=249971,00.html

We at Tax Preparer Learning Systems, LLC wish test takers the best of luck.

www.taxpreparerlearningsystems.com

IRS Competency Exam Start Date

The IRS has not yet published a start date, but all indications are that it will be November, and possibly early November.  A candidate information bulletin has been published.  Here is the link:
http://www.irs.gov/pub/irs-utl/rtrpcandidateinfobulletin.pdf

The IRS site says that "Test scheduling is not available until November." 

It seems the start is near.

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Concerning Being a Supervised Tax Preparer

Details Concerning Being a Supervised Tax Preparer

As you know, there are new IRS rules concerning tax return preparers.  To begin with, all tax return preparers must get a Preparer Tax Identification Number (PTIN).

Only some tax preparers will be eligible to be considered a Registered Tax Return Preparer (RTRP).  Those who will become Registered Tax Return Preparers will need to pass an IRS sponsored competency exam.  In addition to the competency test, RTRPs will also need to take continuing education each year, starting in 2012.

Certain PTIN holders are exempt from the competency testing and continuing education requirements.  The first group of exempt preparers includes attorneys, CPAs, enrolled agents, enrolled retirement plan agents, and enrolled actuaries.  Another is those individuals who do not prepare Form 1040 series returns.

And finally, another group of PTIN holders who are exempt from competency testing and continuing education are “supervised preparers”.  Supervised preparers are individuals who do not sign the tax return as a paid preparer, and who are not required to sign tax returns as a paid preparer. These individuals must be supervised by an attorney, CPA, or enrolled agent, who owns at least 80% of the firm, and who sign the return.

So this brings into question of who is required to sign as a paid preparer.  It is not simply a matter of preparers not signing any returns, and then simply having a supervising attorney, CPA, or enrolled agent sign the return.  IRS rules state “the individual preparer who has the primary responsibility as between or among the preparers for the overall substantive accuracy of the preparation of such return or claim for refund shall be considered to be the income tax return preparer” for purposes of signing the return. 

That means that unless the supervising attorney, CPA, or enrolled agent has primary responsibility for the determination of the tax shown on the return, they should not sign the return.  The supervising attorney, CPA, or enrolled agent would need to make inquiries, and have enough understanding of the client in order to make a knowledgeable judgment that the return is correct.  It would not seem to be enough for the supervisor to simply rely on the judgment of another preparer.

Penalties apply if the preparer who has primary responsibility for the substantive accuracy of the return does not sign the return.

More details at http://www.taxpreparerlearningsystems.com/

RTRP Exam Start Date

The Internal Revenue Service continues to say that the Registered Tax Return Preparer competency exam will be available starting in October.  We have not seen a specific start date, but the Service has been consistent in sticking with the October 2011 start.  We continue to monitor any news regarding the exam, and will update if any new information is released.  Good luck with your preparations.

House Oversight Subcommittee Hearing Comments

On July 28, 2011. the House Ways and Means Committee - Subcommittee on Oversight held a hearing to review the progress of the return preparer program.  Among those who testified were representatives of the National Association of Tax Professionals, American Institute of Certified Public Accountants, National Association of Enrolled Agents, H&R Block, and others.  Also testifying was David Williams of the IRS Return Preparer Office. 

A great deal of support for the steps that the Internal Revenue Service has taken was voiced, along with some concerns.

The National Association of Tax Professionals (NATP) testified.  Their representative expressed great concern that the changes to Circular 230 related to Registered Tax Return Preparers (RTRP) create an uneven playing field for non-legacy (other than attorneys, CPAs, and Enrolled Agents) tax preparers.  Specifically, there is concern that RTRPs will not be able to adequately provide advice to clients pursuant to Section 10.3(f)(3) of Circular 230.  Concern was also voiced that the exceptions carved out for those supervised by attorneys, CPAs, and Enrolled Agents again creates competitive disadvantages for some of the preparer community.  http://waysandmeans.house.gov/UploadedFiles/Cinquemani.NATP_testimony_July_28.pdf

The National Association of Enrolled Agents (NAEA) was concerned that the upcoming competency exam will test the Form 1040 series only, while there will be no testing of non-Form 1040 type returns.  At the same time, preparers can prepare non-Form 1040 without any testing of their competency.  NAEA also was concerned regarding the promotion and enforcement elements of the program.  http://waysandmeans.house.gov/UploadedFiles/Gary_Testimony728.pdf

H&R Block testified and stated that the IRS competency exam is redundant to the H&R Block program related to their own tax preparers.  They also expressed a desire for the implementation of a group registration program.  http://waysandmeans.house.gov/UploadedFiles/PickeringHRBlock.pdf

The hearing showed broad support for the IRS certification program, but also a number of concerns.  From the various perspectives of those who testified, special concerns were voiced.  Our community, the tax return preparer community, is diverse, so some diversity of opinion is to be expected.

Tax Preparer Learning Systems, LLC
www.taxpreparerlearningsystems.com

Tax Return Preparer PTIN and Other Regulation Issues

OK, we are fools for the acronym.  In case you are not into them like us, PTIN stands for Preparer Tax Identification Number.  PTIN's are required for all of us who prepare, or help to prepare, all or substantially all of a federal return, or claim for refund.  That means just about all of us need to apply for a PTIN on an annual basis.

It is interesting to note that nearly all of us in the return preparer community need to apply each year for a PTIN.  However, from that point onward, there are different rules for us depending on our status.  For example, CPA's need to have a PTIN, but they are not required to take the upcoming competency exam, or comply with the IRS continuing education requirements. 

The phrase Registered Tax Return Preparer (RTRP) is a designation that no one, at this point in time, qualifies for.  If you see anyone using the phrase to describe themselves, they should be advised to stop doing so.  Only those PTIN holders who have passed the competency testing, and the suitability check, will be considered RTRP's.  In other words, it is a special group of people who will hold the designation.

Getting back to PTIN issues, here are some of the newer developments:

1. 2012 PTIN sign up program will begin around October 2011.
2. The PTIN will now be good for an annual basis.  Previously, the PTIN was good at the time of registration.
3. PTIN application questions will be revised, and will now allow the following individuals to identify themselves:
1. Supervised, non-signing preparers who report to CPA, attorneys, or enrolled agents.
2. Those who do not preparer any Form 1040 series returns.

We are awaiting more information from the IRS regarding the upcoming competency exam.  It is late-July as this is being written.  Since the exam is projected to be ready in October, more news should be forthcoming soon.

More information at: http://www.taxpreparerlearningsystems.com/

Continuing Education Requirements

The IRS has given some clarification on the upcoming continuing education (CE) requirements that are part of the Registered Tax Return Preparer initiative that is rolling out.

The CE requirement for those who are pegged to take the competency exam and become Registered Tax Return Preparers is slated to begin in 2012.  Once the requirement begins, even those who have not yet taken the competency test will need to meet the CE requirements.  That means that we cannot put off the CE requirement by delaying the exam.

There is a 15 annual requirement for CE.  Three hours of tax update, two hours of ethics, and 10 hours of federal tax laws.

Only IRS-approved providers can provide the courses.  No providers have yet been approved.  

Since the CE program has not yet started, any courses or education taken to this point will not count towards your 2012 requirement.

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Dependents - In Summary

We need to always take care to pay attention to the details, but there are times when we need to be familiar with subjects at the summary level as well.  Dependents in summary (or big picture) can help us prepare to sit for the Registered Tax Return Preparer competency exam.

The biggest picture.  To claim someone else as a dependent, they must be either a 1) qualifying child, or 2) qualifying relative.  We first try to determine if they are a qualifying child, and then, if not, we determine if they are a qualifying relative.  Remember that to be a dependent they must be one or the other; there is no "other" category.  The rules for both are different, so look at the tests for qualifying child, and then clear the memory bank and look at the tests for qualifying relative.  It is easy to mix up the tests, so discipline is required.

There are five specific tests to be a qualifying child: 1) relationship, 2) residency, 3) age, 4) qualifying child support test, and 5) joint return test (after 2008).  Additionally, taxpayer themselves cannot be a dependent of another taxpayer, and they must be a U.S. citizen or resident of U.S., Mexico, or Canada. 

There are four specific tests to be a qualifying relative: 1) relationship or full-year residency, 2) gross income test, 3) qualifying relative support test, and 4) taxpayer not a qualifying child.  Additionally, taxpayer themselves cannot be a dependent of another taxpayer, and they must be a U.S. citizen or resident of U.S., Mexico, or Canada.  The joint return test also applies.

We here at Tax Preparer Learning Systems wish you the best of luck as you navigate the new IRS regulations, and the upcoming test in particular.  Additional information is available at http://www.taxpreparerlearningsystems.com/.

Married Taxpayers Filing Status

As mentioned in a previous post, you will often find the determination of the filing status for married taxpayers to be straightforward.  However, there are some wrinkles that the exam might require you to know.

Whether a marriage is recognized is determined by state law in the state the marriage began.  If valid in the state where the marriage began, the marriage continues to be recognized for federal tax purposes even if the couple moves to another state,  Of course, the most common example of this is common-law marriages. 

Pursuant to the Defense of Marriage Act, for federal tax purposes, marriage is the legal union between a man and a woman.  Same sex couples whose union is recognized under state law, cannot file as married on the federal return.

Same as with recognition of the beginning of a marriage, state law is also determinative when considering when a marriage ends. For federal tax purposes, taxpayers for whom a decree of divorce, or a decree of separate maintenance has been issued, are no longer considered married.

An annulment requires the filing of amended returns to change filing status to an unmarried filing status from a married filing status.  In other words, as if a marriage never existed.  When amending returns for the filing status of married taxpayers, couples can change from married filing separate to married filing joint, but cannot change from married filing joint to married filing separate (unless done so before due date)

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IRS Seeks Input from Tax Preparers

In Notice 2011-48, the IRS announces that it will seek input from the tax preparers and others regarding the 1040 series competency exam that is scheduled to be released later this year.  This is a great opportunity for the those of us in the preparer community to influence the examination content and process.  Among the things that IRS is interested in receiving input are:

• The areas of tax law that should be covered by the examination;
• The approximate percentage of the examination that should be dedicated to each area of tax law identified above;
• The format of the examination (e.g., multiple choice, short-answer questions, written tax computations problems, or a combination thereof);
• The general difficulty and approximate length of the examination;
• The detail of examination result information reported to the applicant (e.g., pass/fail, numeric scores);
• The appropriate time-of-year/month to annually update the examination to reflect the most current law;
• The frequency that the examination should be administered (e.g., annually, semiannually, quarterly, monthly, weekly, or daily);
• The period of time that applicants, other than those individuals who obtain a preparer tax identification number prior to the examination being offered, should be required to wait before retaking the examination if the applicant does not pass;
• The administration of the examination in languages other than English and the other languages that should be considered;
• The elements of the special enrollment examination (content or test administration) for either enrolled agents or enrolled retirement plan agents that the competency examination should attempt to utilize or should not attempt to reproduce; and
• Any additional information that the IRS should consider when developing the content of, and the procedures for administering, the competency examination.

The IRS provides contact information that input can be submitted to.

This blog is published concurrently at our website: www.taxpreparerlearningsystems.com

IRS Has Published Final Regulations

In TD 9527, the IRS issued final regulations, effective on August 2, 2011, that make the designation Registered Tax Return Preparer (RTRP) official.  As you may have seen in other communications, to become a  RTRP, preparers must meet the following requirements:

1. Possess a current or otherwise valid PTIN.
2. Pass a minimum competency exam.
3. Pass suitability and tax compliance checks.
4. And to continue to hold the RTRP designation as time passes, meet continuing education requirements
1. Fifteen hours per year
2. Of which, three hours are federal tax update, and
3. Of which, two hours are tax ethics.

The IRS has also issued Notice 2011-45 that makes it clear that no one can hold themselves out as a "Registered Tax Return Preparer" at this time.  To call yourself an RTRP, you must first meet the above requirements.  Since the exam is not yet available, no one has yet met the requirements.

We expect the exam to be available in the near future, sometime this fall.

Head of Household Filing Status

In real life situations, filing status is pretty straightforward.  For example, you have a married couple in front of you, they get along well, and want to file together.  Of course, married filing jointly.  Or you have a 25 year old client, never married, has no children, and does not provide financial help for anyone else.  Again, simple enough to choose single as the filing status.  Unfortunately, in a test environment, it is hardly ever that simple. 

The filing status most ripe for the test makers is head of household.  As you preparer for the exam, focus on this filing status.  Some of the main points.

• Qualifying Person.  Can be a qualifying child (even if dependent exemption is claimed by the other parent because of divorce or separation rules) or a qualifying person (not if relative due to member of household test).
• Parents.  Must be a qualifying person, but does not have to live with the taxpayer.
• Lived with taxpayer.  For head of household, this is over half the year.  Don't get confused with qualifying widow(er) rules which require a full year.  Also, not to be confused with married but unmarried for tax purposes which require the spouse to be out of the house the last six months (July 1 onward to the end of the year.
• Paid over half the cost of keeping up the home.  This is a short, and by and large a specific list of costs related specifically to the home (also food consumed in the home).  Costs for someone's support are much more wide ranging.

Welcome to the Registered Tax Return Preparer Exam Spot

Welcome to our blog.  This site is a digital hangout for those getting ready to take the IRS Registered Tax Return Preparers exam.  Useful tax information and exam updates will be the mainstay of the blog.  It is also a meeting place for would-be exam takers to connect with others interested in the exam.

We look forward to hearing from you, and hope you find the information useful.

Sincerely,

Your friends at TPLS.