New IRS Tax Preparer Requirements - California Tax
Effective January 1, 2011, the IRS will require all paid tax preparers who sign federal tax returns to have a Preparer Tax Identification Number (PTIN).
IRS online registration for tax preparers will start September 1, 2010. Tax preparers will need to register with the IRS and obtain a valid PTIN no later than December 31, 2010. Tax preparers who already have a PTIN will be reissued their current PTIN when they register online.
Currently, there is no application fee for PTINs; however, the IRS does plan to charge a PTIN fee (new and renewing applicants) once registration starts September 1, 2010.
In addition to the PTIN requirement, paid tax preparers who are not attorneys, certified public accountants or enrolled agents will have to pass an IRS competency exam and complete continuing education requirements. Tax preparers registered with the California Tax Education Council (CTEC) will not be exempt from the new IRS mandate.
Nonexempt tax preparers will be required to:
- Obtain a PTIN.
- Complete 15 hours of continuing education on federal tax laws each year.
- Renew IRS registration every three years from the date of initial registration.
- Within three years of initial registration, pass a competency exam from the IRS.
Starting January 1, 2011, nonexempt tax preparers who fail to meet the December 31, 2021 registration deadline will have to pass the IRS competency exam before they can be issued a PTIN.
Exempt tax preparers (attorneys, certified public accountants and enrolled agents) can still register after December 31, 2010; however, they cannot prepare or sign federal tax returns until they register with the IRS and obtain a valid PTIN.
Nonexempt tax preparers will have three years from the date of initial registration to pass two levels of IRS examination. The test can be taken as many times as needed; however, a fee will be charged each time. Once the practitioner passes the test, the requirement is filled, and the test doesn't have to be taken yearly.
Nonexempt tax preparers will have to complete 15 hours of continuing education on federal tax laws each year. The hours must be completed from an IRS-approved education provider and include:
- 3 hours of federal tax law updates.
- 2 hours of tax ethics.
- 10 hours of other federal tax law topics.
IRS continuing education requirements for nonexempt tax preparers take effect January 1, 2011. Any federal education completed in 2010 will not count toward the new IRS mandate.
Right now there is no IRS qualifying education prerequisite; however, CTEC will continue enforcing its 60-hour qualifying education requirement for new CTEC registered tax preparers (CRTP). Also, CTEC plans to conform its federal continuing education requirement to the IRS', so CRTPs are not forced to fulfill "double" federal education requirements.
As for the 2010/2011 CTEC registration cycle, CRTPs are still required to complete 20 hours of continuing education (12 hours federal, 4 hours state, 2 hours of ethics, and 2 hours federal and/or state), and renew their registration by October 31, 2010.
Tax Preparer Enforcement
The IRS plans to implement an enforcement strategy for the 2011 tax season. Our enforcement program to identify and penalize unregistered tax preparers will remain intact for California. All CRTPs will be required to complete IRS and CTEC requirements in order to be legally qualified to prepare state and federal tax returns.