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.

http://www.taxpreparerlearningsystems.com/

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/.