IRS to Begin Fingerprinting Tax Preparers

Professional tax preparation software, 1099 printing, w-2 printing
WASHINGTON, D.C. (SEPTEMBER 22, 2011)

BY MICHAEL COHN

The Internal Revenue Service plans to start fingerprinting thousands of tax preparers as part of its oversight program and run the fingerprints through an FBI database.

The IRS released more details on its tax preparer oversight program on Wednesday, and said registered tax return preparers would now be required to renew their Preparer Tax Identification Numbers on an annual basis. In addition, the 15-hour continuing education requirement will take effect next year.

As part of the new guidance, the IRS released Notice 2011-80, which provides that PTINs must now be renewed on a calendar year basis. All PTIN holders must renew their numbers using the online PTIN application or paper Form W-12 and pay the required fee, which will be $64.25 for next year, after Oct. 15 and before Jan. 1 on an annual basis.

The notice also clarifies a number of other issues. The IRS has been issuing provisional PTINs to individuals who are not attorneys,CPAs, or enrolled agents to allow them to prepare tax returns prior to meeting competency testing and suitability requirements because the testing and continuing education programs have not yet begun. The IRS said it would continue issuing provisional PTINs at least through April 18, 2012. Once the IRS stops issuing provisional PTINs, however, tax return preparers who are required to complete the competency test or suitability requirements must complete these requirements successfully prior to obtaining an official PTIN. 

Certain tax return preparers who must pass a suitability check will have to provide their fingerprints so that a Federal Bureau of Investigation database search can be conducted. Generally, the fingerprint requirement will affect those preparers who currently have provisional PTINs.

Under the current proposed regulations, any participant in the PTIN, acceptance agent, or authorized e-file provider programs who resides and is employed outside of the U.S. will not have to be fingerprinted to participate in these programs. Those preparers, however, must comply with all the other elements of the suitability check. In addition, the Treasury Department and the IRS are continuing to study which additional requirements should apply to people  outside the U.S. Any additional requirements will be set forth in future guidance. 

Attorneys,  CPAs, enrolled agents, enrolled retirement plan agent and enrolled actuaries also are expected to be exempt from the fingerprinting requirement at this time. However, they are still required to answer all the suitability questions on the PTIN application, such as whether they have been convicted of a felony in the previous 10 years. Individuals participating in the PTIN, acceptance agent, or authorized e-file provider programs also are required to meet any other requirements of the programs in which they are participating.

The IRS said it is working with third-party vendors who will collect and process the fingerprints. 
The IRS notice also provides that the 15-hour continuing education requirement for certain tax return preparers will take effect starting in 2012. Registered tax return preparers and individuals required to pass the competency examination before Dec. 31, 2013, must complete the 15-hour requirement prior to renewing their PTINs for 2013 and subsequent years.

The IRS also published proposed regulations Wednesday (REG-116284-11) that would establish user fees for fingerprinting and taking the competency examination. As proposed, the IRS portion of the fingerprinting fee would be $33, and the IRS portion of the testing fee would be $27. These user fees are in addition to any fees charged by the third-party vendors administering the programs. The fees to be charged by third-party vendors are not being announced at this time, but the total fees, including the IRS user fees, are expected to be between $60 and $90 for fingerprinting and $100 and $125 for testing.

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