Paid Tax Preparers Face Intensified Requirements

Just like many of their clients, who wait until the last minute to file their tax returns, a large segment of tax return preparers appear in no hurry to follow an Internal Revenue Service initiative designed to ensure standards for competency and ethics.

The initiative, launched by IRS commissioner Doug Shulman in June 2009, requires anyone paid to prepare, or help prepare, all or substantially all of a federal tax return to register with the agency and receive a Preparer Tax Identification Number. The preparers also must pass a 120-question competency test, to be taken before Dec. 31, 2013.

As of June 5, the last time the IRS released figures, almost 850,000 preparers had registered. Eliminating certified public accountants, enrolled agents and attorneys, whom the IRS exempts due to their existing testing requirements, the agency estimated about 340,000 preparers would need to be tested.

Also on June 5, however, the IRS said fewer than 5,000 people had been certified as Registered Tax Return Preparers by passing the test. Terri Cantrell, a general manager at Jackson Hewitt Tax Services, said she was told at a companywide meeting in September that only about 17,000 people had even taken the test.

It doesn’t take an accountant to do the math and deduce a last-minute rush to take the test could be in the offing.

“There’s not going to be enough seats at those testing centers if everybody waits until the last minute,” Cantrell said.

Selling Point

Cantrell said Jackson Hewitt associates won’t be among those waiting until the last minute. Instead, she said, the company is urging its preparers to take the test in time for the 2013 tax season, which is expected to begin in late January.

Jackson Hewitt operates 14 offices in Benton and Washington counties, and Cantrell said it expects to use about 90 preparers this season. To take the test, they must travel to Fort Smith, Tulsa or Little Rock.

Craig McCollough, meanwhile, owns six H&R Block franchises in Northwest Arkansas. They will employ about 40 tax professionals this tax season and prepare about 7,000 returns.

Like Jackson Hewitt, McCollough said H&R Block is urging its preparers to take the test before the upcoming season. Companywide, McCollough said that means as many as 100,000 H&R Block preparers will take the test.

The cost of the test is $116 per preparer, while the cost to register with the IRS is $64.25 per preparer. There’s also an annual renewal fee of $63 per preparer.

“Overall, we’re for it,” McCollough said of the initiative. “There was a lot of nervousness going into it because the IRS wasn’t real specific initially about the test and what it would cover, the cost, and any ongoing requirements.

“Now that we know what’s expected, we still have to deal with the cost, obviously, but we’re going to promote the fact that all our tax preparers are certified now.”

McCollough estimated that 60 percent of all filers pay someone to help them with their tax filings. The certification process should provide them with an added sense of security, both McCollough and Cantrell said.

“Just like a beautician has to be licensed, now we have to be licensed,” she said. “That’s a good thing, because for a lot of the people we deal with, this will be the biggest transaction they’re involved in all year.

“We need to be accountable. When those people come in and sit down across from us, we want them to be confident and comfortable, to know we’re licensed and are going to do things the right way.”

In addition to the registration and testing requirements, the IRS also has mandated 15 annual hours of continuing education. The credits must include 10 hours in federal tax law, three hours in federal tax law changes and two hours in ethics. This requirement took effect in January, and is applicable even to those who haven’t taken the test.

Ethical requirements previously limited to CPAs, EAs and attorneys also now apply to all paid return preparers. All paid preparers also must undergo a tax compliance check, and are subject to the standards for practice outlined in Treasury Department Circular 230.

The IRS also is considering requiring certain tax return preparers to undergo a background check as part of PTIN requirements. Preparers will be contacted if they are required to undergo a background check, and any updates on background check requirements will be posted on the agency’s website.