Federal Tax Preparers Beware

IRS to enact laws to regulate federal tax preparers.

January 14, 2010
by Sukanya Mitra

This just in. Federal tax preparers who are not CPAs should take note. The Internal Revenue Service (IRS) is moving forward with plans to regulate federal income tax preparers.

The object of the new rules is to streamline tax-preparing processes and make sure everyone is on the same page and prepares tax forms in the same way. Luckily since CPAs are already regulated, they will be excused from parts of the new requirements. “CPAs will have to register and receive a preparer’s taxpayer identification number (PTIN), but are exempt from the testing and CPE requirements,” pointed out Alistair Nevius, editor-in-chief of AICPA’s The Tax Adviser magazine. “However, the IRS says it will monitor returns filed by CPAs and other exempt groups and may institute testing and CPE requirements for them in the future,” he added.

Currently, any individual can be compensated for preparing tax returns without any training, licensing or oversight. According to the IRS, while attorneys, CPAs and enrolled agents must pass difficult examinations to practice, others such as unenrolled preparers are not required to do so. 

National Taxpayer Advocate Nina E. Olson feels the new law regulating these tax preparers is a “significant far-reaching initiative,” because it would protect taxpayers and improve tax compliance. 

The American Institute of Certified Public Accountants (AICPA) supports the IRS in its plans to regulate non-licensed tax preparers. “The AICPA worked closely with the IRS during the public comment period leading up to this proposal and we believe this change will foster greater compliance with the tax code and better, more reliable service for U.S. taxpayers across the board,” said AICPA President and CEO Barry Melancon.

However, Melancon showed concern that the new regulations may confuse taxpayers about who is and who isn’t licensed properly and may think that these tax preparers are as qualified as CPAs.

“The IRS has not announced when the new rules will go into effect, except that it’s not for this year. What they have issued so far are “recommendations” — which then need to be implemented through regulations or other IRS rulemaking,” said Nevius. “People seem to be assuming that it will go into effect in 2011, but so far there’s nothing official on that.”

For more information and updates on this proposal, visit: www.aicpa.org.

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Sukanya Mitra is Managing Editor of the Insider™ e-newsletter group.