What Are the IRS Requirements to Be a Tax Preparer?

If you are paid to prepare tax returns you are required by the IRS to have a preparer tax identification number (PTIN). According to regulations issued by the IRS, all paid tax return preparers had to apply for a PTIN before preparing any federal tax returns in 2011, including preparers who already had a PTIN.

The requirement applies to all paid tax return preparers, attorneys, certified public accountants and enrolled agents. If you are an employee and you prepare your employer's federal tax returns, you are not required to have a PTIN.

You can apply for a PTIN online on the IRS website. Or you can use the paper application Form W-12. The fee for applying for a PTIN is $64.25. According to the IRS, if you registered your existing PTIN or obtained a new PTIN after September 28, 2010, you must renew your PTIN in the renewal period that starts in October 2011. If you had a PTIN before September 28, 2010 and have not renewed it, you must register using the online system or by filing Form W-12.

If you file tax returns as an authorized IRS e-file provider, you also need an Electronic Filing Identification Number (EFIN). Starting in 2011, tax return preparers who expected to file 100 or more tax returns during the year are required to file electronically. In 2012 that number is reduced to 11 or more returns.

You can become an authorized e-file provider online on the IRS website by creating an IRS e-Services Account and submitting an application. After you submit your application, the IRS does a suitability check on your firm and the persons named on your application. The suitability check includes reviewing credit, tax compliance, criminal background and a check for any prior non-compliance with the e-file requirements. If you are approved, the IRS sends your EFIN number in an acceptance letter. According to the IRS, it takes about 45 days to receive an EFIN so you should plan ahead.

There will be additional requirements for certain tax return preparers in the future. For example, some tax return preparers will be required to take continuing education courses each year starting in 2012. There will also be background checks and competency tests.

According to the IRS, all tax preparers will be required to renew their PTIN each year. Attorneys, certified public accountants and enrolled IRS agents who are in good standing with their licensing agency have no additional IRS requirements. Supervised preparers who are employed by an attorney, certified public accountant or enrolled agent must submit fingerprints for a background check. All other tax return preparers will have to submit fingerprints, pass a competency test and take continuing education courses annually.

You can download the IRS Return Preparer Test Specifications and find a list of recommended study materials on the IRS website under Registered Tax Return Preparer Competency Test Information.

Sources:

Become an Authorized e-file Provider, IRS

Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application

IRS Return Preparer Test Specifications, IRS

Many Tax Return Preparers Must Use IRS e-file Beginning in 2011, IRS

New PTIN Requirements for Tax Return Preparers, IRS

New Return Preparer Regulations - Overview, IRS

Registered Tax Return Preparer Competency Test Information, IRS

Requirements for Tax Return Preparers: Frequently Asked Questions, IRS