ASPPA Alerts Members to New IRS Tax Preparer Standards

Melinda | September 9, 2010 | 0 Comments

Ever since the Internal Revenue Service (IRS) announced it will require all paid tax preparers to register with the agency in March, the issue has become a hot topic for unenrolled tax professionals. The buzz over the new requirements attracted more than 220 retirement plan professionals to ASPPA’s live webcast for specifics on how the new rules might impact their business.  

“Retirement professionals want to know how this new IRS directive will impact their business, especially since most file information returns (Form 5500) instead of the standard individual tax returns (Form 1040),” said Brian H. Graff, executive director and CEO of The American Society of Pension Professionals & Actuaries (ASPPA).  “These plan administrators handle multiple clients and have a variety of staff members involved in the process.  There is a lot of concern in the industry that the IRS will apply the requirement broadly resulting in the need to register a lot of employees, many of whom arguably just do clerical work.  Bottom line—they want to understand the new rules to make sure they are in compliance but they also want the rules to make common sense.”

Beginning January 2011 all paid tax preparers will be required to complete the following:

  • register for a Paid Tax Preparer Identification Number (PTIN) and pay $64.25 user fee
  • pass a tax competency test or meet recognized credentialing requirements
  • complete annual continuing education requirements on tax topics (15 hours)

Preparers who register for a PTIN before January 2011 will have until December 2013 to complete both a tax competency test and required continuing education.

Circular 230 professionals are required to register for a new PTIN but are exempt from additional educational or competency tests,  since they are already must meet these requirements whether they are a CPA, attorney, enrolled agent or actuary, or enrolled retirement plan agent (ERPA). 

 “ASPPA advises one way to become compliant is to become an Enrolled Retirement Plan Agent (ERPA). Retirement plan professionals should consider the ERPA program as an alternative to the general tax competency test.  We think a retirement plan professional would rather take exams or attend educational courses related to retirement plans rather than focus on general tax issues,” said Graff. 

Graff and ASPPA Director of Regulatory Affairs Craig Hoffman fielded numerous questions from practitioners who asked about the logistics of registering for a PTIN, how the guidance relates to informational returns like Form 5500, penalties involved, which staff should request a PTIN, and the cost of the PTIN user fee.

One major sticking point is defining what constitutes a tax return preparer (TRP). The IRS defines a TRP “as any individual who is compensated for preparing or assisting in the preparation of, all or substantially all of a federal tax return or claim for refund. However it’s unclear what “substantially all of a return” means for retirement plan tax professionals.

“Our biggest concern is that the definition of a tax return preparer is overly broad. We believe there should be a single preparer or at a minimum the definition of a TRP should be narrowed. We look forward to working with the IRS on clarification of the new guidelines and plan to submit our recommendations soon,” said Graff.

Hoffman recommended professionals review materials on if they have further questions.


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