IRS to Increase Oversight of Tax Return Preparers

Beginning in 2011, The IRS will step up its watchdog duties and require all paid tax return preparers who sign, prepare, or assist with preparing federal tax returns to have a Preparer Tax Identification Number (PTIN). Paid tax preparers must apply for this PTIN and use it on all tax returns they prepare.

California, New York, and Oregon are the only states that have set licensing requirements in place. Now the IRS plans to enforce stricter standards on all preparers who are not CPAs, attorneys, or Enrolled Agents. (These tax preparers already have strict licensing standards in place.) Nonexempt tax preparers will soon be required to complete continuing education courses on current tax law. They will also be required to pass an IRS competency exam, be current on all of their own tax return filings and pay an annual renewal licensing fee.

The IRS believes the stricter oversight will help reduce fraud, improve compliance and close the tax gap. Faulty or fraudulent tax preparers could lose their PTIN license and not be allowed to continue preparing tax returns.

The IRS will phase in some of these rules during 2011, giving non-licensed preparers a grace period to comply. Taxpayers can expect better professional standards when they pay someone to prepare their income tax returns in the future.


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