Tax Stringer Home

Committee CPE Session

Committee Calendar

CPE Spotlight

CPE Schedule

Member Spotlight

Susan Brown Otto

NYSSCPA Member-Only
Wireless Services Discount

Tax Resources

Tax Advocacy

Tax Stringer Archive


What Paid Tax Return Preparers Need to Know About the IRS’ New PTIN, Testing and CPE Program
By Caroline Rule, JD, and Sidney Kess, CPA, JD, LL.M.,

It is crucial that paid tax return preparers pay attention to new IRS regulations concerning Preparer Tax Identification Numbers (PTINs), and proposed regulations regarding testing and continuing professional education (CPE). Many preparers who already have PTINs will have received written notification from the IRS of the new requirements.

Until January 2011, anyone could prepare a federal tax return for someone else and charge a fee without any requirement that the preparer be enrolled to practice before the IRS or be registered with the IRS. However, the IRS recently conducted a six-month study that resulted in proposals to regulate the tax preparation industry more closely. These proposals included the new PTIN registration requirement, as well as testing and CPE requirements for paid tax return preparers. It will take several years to implement all the initiatives proposed as a result of the study, but the PTIN requirement is already in full force. The IRS also plans to ramp up its criminal investigation of tax return preparers who are believed to have assisted in the filing of fraudulent returns.


Regulations now in effect require all paid tax return preparers to apply for a PTIN, even if they already have one, before they are permitted to prepare any federal tax returns in 2011. A tax return preparer who is required to obtain a PTIN is defined as, “any individual who is compensated for preparing, or assisting in the preparation of, all or substantially all of a tax return or claim for refund of tax,” according to TD 9501; 26 CFR Section 1.6109-2(g).

The requirement that preparers use a PTIN, “will allow the IRS to better identify tax return preparers, centralize information, and effectively administer the rules relating to tax return preparers,” the document continued.

The PTIN system itself was established some years ago as a means of providing a tax return preparer with an alternative to including his or her Social Security number along with the preparer’s signature on a tax return or claim for refund. Now, however, it is no longer permissible for a tax preparer to use his or her Social Security number. From now on, the PTIN will be the exclusive means of identification for any paid tax return preparer who submits returns to the IRS.

Registering for a PTIN

The PTIN requirement applies to all paid tax preparers, including enrolled agents, CPAs and attorneys. It is not sufficient for a firm to obtain a PTIN; each individual preparer must have his or her own. Only individuals over the age of 18 are eligible to apply for PTINs.

Nevertheless, preparers who received PTINs prior to Sept. 28, 2010 must register using the new system, which was launched on that date. Tax return preparers may register immediately online and the process is estimated to take around 15 minutes. Preparers need to create an account, complete the PTIN application and pay a fee of $64.25. According to T.D. 9503, a third-party bank/vendor that processes the application fee will receive $14.25 of the total fee and the IRS will collect $50.

Preparers may use a paper application, Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application, which will take the IRS four to six weeks to process. Note that Form W-7P, Application for Preparer Tax Identification Number, is no longer in use.

Preparers who have never filed a federal income tax return—including individuals from Puerto Rico who have no United States income tax filing requirement—must complete the new paper form, and submit it along with a copy of their Social Security cards and one additional form of identification that contains a photo ID. All documents must be notarized or certified.

Paid tax return preparers should keep in mind that they will be unable to receive a PTIN if: they are subject to testing requirements that they have not yet satisfied; they have indicated that they are not in compliance with their federal tax responsibilities; and/or they indicated that they have been convicted of a felony in the past 10 years. In cases like these, applicants receive provisional PTINs until the condition is resolved or reviewed and cleared.

Who Needs PTINs and Who Doesn’t?

As noted by IR-2010-99 (9/28/10); 26 CFR Section 1.6109(g), the class of individuals who are required to obtain a PTIN is broad, encompassing any person who is compensated for preparing or assisting in the preparation of a federal return or claim for refund. While the AICPA suggested that the IRS exempt from registration return preparers who do not sign returns, such as preparers employed and supervised by CPAs, the IRS declined to adopt this suggestion. Enrolled retirement plan agents and enrolled actuaries qualify as practitioners and therefore must obtain PTINs.

Certain individuals who are peripherally involved in tax return preparation who are not tax return preparers, however, do not require PTINs, the IRS said. Examples include a bookkeeper who gathers receipts and organizes information for subsequent use by a tax return preparer, and a paid intern or administrative assistant who performs data entry on tax returns but does not provide advice or answer tax questions. In addition, those who volunteer to prepare returns for lower-income individuals and receive no compensation for doing so are not considered tax return preparers.

Testing and CPE

The IRS’s new oversight of tax return preparers will require certain tax return preparers to pass a test, referred to as a competency test or return preparer examination. The IRS expects that testing will begin in mid-2011, with IRS guidance expected in the spring of 2011. Tax return preparers who are subject to testing requirements but who obtain PTINs before testing becomes available will have until Dec. 31, 2013 to pass the competency test. The IRS expects to charge a fee for this test.

Attorneys, CPAs and IRS enrolled agents who are active and in good standing with their respective licensing agencies will be exempt from the competency test. Enrolled actuaries and enrolled retirement plan agents (ERPAs) also will be exempt from testing requirements if they prepare returns only within their limited practice areas.

The IRS also plans to require ongoing CPE for all paid tax return preparers other than attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.

In many states, a registered or licensed public accountant (LPA) has the same rights and privileges as a CPA. An LPA in these states is eligible to practice before the IRS by virtue of his or her public accountant’s license, and will not be required to pass the IRS' return preparer examination nor satisfy the CPE requirement for tax return preparers.

The following is a nonexclusive list of states where a LPA has the same rights and privileges as a CPA: Alabama, Alaska, Arkansas, California, Colorado (Registered Public Accountants only), Connecticut, Hawaii, Idaho, Maine, Montana, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont and West Virginia.

In Delaware, Illinois, Iowa, Kansas, Michigan, Oregon (unless the person qualified for, and applied to take, the Uniform CPA examination before Jan. 1, 2002) and South Carolina, LPAs do not have the same rights and privileges as CPAs and will therefore be required to pass the IRS's return preparer examination and satisfy the CPE requirements in order to prepare any federal tax return for compensation (unless the LPA is an attorney or enrolled agent).

The IRS has not yet indicated when it will issue guidance on CPE requirements, nor when those requirements would go into effect.

Circular 230 Applies to All Paid Tax Return Preparers

Under proposed IRS regulations (REG-138637-07), the ethical rules and recordkeeping requirements set forth in Treasury Department Circular No. 230 will now apply to all paid return preparers because, “registered tax return preparers” will be included in the class of professionals subject to the circular’s requirements. Previously, Circular 230 applied only to attorneys, CPAs and enrolled agents who practice before the IRS. The Office of Professional Responsibility may institute proceedings to impose a monetary penalty or to censure or suspend any individual subject to Circular 230 who violates its rules.

Civil Penalties for Failure to Include PTINs on Returns

Tax return preparers who are required to, but fail to, include a PTIN on a tax return or refund claim are subject to a penalty, unless the failure is due to reasonable cause and not willful neglect, according to T.D. 9501. The penalty is $50 for each return or claim that does not include a PTIN, with the maximum penalty that can be imposed on any person during a calendar year being $25,000, per IRC Section 6695(c).

Nonsigning Preparers Supervised by CPAs

On Dec. 30, 2010 the IRS released Notice 2011-6 containing some additional guidance on the regulation of paid tax return preparers. The notice provides an exception from the competency test and continuing education requirements for certain nonsigning preparers who are supervised by a Circular 230 practitioner. It also exempts from the competency test preparers who do not prepare Form 1040 returns. Additionally, the notice lists forms that are not considered “returns” for the purposes of the requirement that preparers use their PTIN.

Caroline Rule, JD, has extensive experience representing clients who are facing investigation or prosecution for alleged tax fraud, bank fraud, health care fraud, money-laundering, and other white collar crimes. Ms. Rule has successfully represented clients in sensitive IRS audits, tax shelter matters, criminal charges for failure to file tax returns and failure to report offshore assets. She is also experienced in complex commercial litigation, including trademark disputes. Ms. Rule is a member of the New York Council of Defense Lawyers and a member of the Committee on Civil and Criminal Tax Penalties of the Tax Section of the American Bar Association. She is a master of the Federal Bar Council Inn of Court and a member of the Federal Bar Council Special Committee on Prison Reform and Sentencing Alternatives. Ms. Rule received her BFA from the University of Cape Town, South Africa, her MFA from the San Francisco Art Institute graduating cum laude, and her JD from Yale Law School. She can be reached at and at 212-808-8100.

Sidney Kess, CPA, JD, LL.M., was named counsel to Kostelanetz & Fink, LLP in 2010. He also was recently selected “Most Influential Practitioner” by CPA Magazine. A nationally renowned tax expert and author/coauthor of hundreds of tax books on financial and estate planning, Mr. Kess was inducted into the NYSSCPA’s Hall of Fame in 2009. Having lectured to more than 725,000 practitioners on tax, financial and estate planning, Mr. Kess is one of the nation’s most prominent lecturers on continuing professional education. Mr. Kess is also consulting editor of CCH Incorporated’s Financial and Estate Planning Reporter, executive editor, tax, for CPA Magazine and editor of the AICPA’s CPA Client Bulletin and CPA Client Tax Letter. In addition, Mr. Kess was chairman of the Advisory Board of Tax Hotline and is a member of the PPC Tax Action Panel. He has edited a column on “Tax Tips” for the New York Law Journal for the past 41 years. He received his BBA from Baruch College, his JD from Harvard University School of Law and his LL.M. from New York University Graduate School of Law. Mr. Kess can be reached at and at 212-489-7670.

Search | Site Map | Become a Member | CareerBank | Press Room | Classifieds | Contact Us  

  Copyright 2011 New York State Society of Certified Public Accountants. Legal Notices

The views expressed in articles published in Tax Stringer are those of the authors and not necessarily those of Tax Stringer, unless otherwise indicated. Articles contain information believed by the authors to be accurate as of original publication. The reader should not construe the content included in Tax Stringer as accounting, legal or other professional advice. If specific professional advice or assistance is required, the services of a competent professional should be sought.