Tax Tips and Choosing an IRS Regulated Tax Return Preparer Subject to New Oversight, Testing and Continuing Education Requirements

With tax season well and truly upon us now a decision many have to make is to do their taxes via ever improving accounting software (like Turbo Tax) or go with a professional tax prepare for more complex returns. More than 80% of taxpayers use a paid tax preparer or tax software to complete their yearly returns, with over 1 million “professionals” accepting money to prepare tax returns for others. However, a number of these tax preparers are unregulated in many states. I have covered the Software vs Professional argument in this article, but the good news is that if you do with a professional tax preparer (which I recommend for more complex returns), then the IRS is planning to roll-out out new registration, testing and ongoing education requirements for those tax professional not already subject to oversight. These include:

  • Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
  • Requiring competency tests for all paid tax return preparers except those (attorneys, certified public accountants (CPAs) and enrolled agents) who are active and in good standing with their respective licensing agencies.

-Requiring ongoing professional education for all paid tax return preparers not already subject to continuing education requirements.

-Extending the ethical rules found in Treasury Department Circular 230 – which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS – to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.

“As tax season begins, most Americans will turn to tax return preparers to help with one of their biggest financial transactions of the year. The decisions announced today represent a monumental shift in the way the IRS will oversee tax preparers,” said IRS Commissioner Doug Shulman in an IRS press release “Our proposals will help ensure taxpayers receive competent, ethical service from qualified professionals and strengthen the integrity of the nation’s tax system. In addition, we are taking immediate action to step up oversight of tax preparers this filing season.”

The new regulations will not be in effect for the current filing season, individual tax returns are due April 15; but the I.R.S announced a sweeping new effort to reach tax return preparers with enforcement and education. As part of the outreach effort, the IRS is providing tips to taxpayers to ensure they are working with a reputable tax return preparer.

-Taxpayers should avoid preparers who promise larger refunds, or those who charge fees based on the size of the refund.

-Use a reputable tax professional who signs the tax return and provides a copy. This could become especially important if you are audited down the line.

-Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return. If possible try and get a referral for a tax preparer from someone you trust and who uses them to do their tax returns.

-Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.

-Find out if the return preparer is affiliated with a professional organization (e.g. CPA or Enrolled agent) that provides its members with continuing education and other resources and holds them to a code of ethics.

Most tax return preparers are professional, honest and provide excellent service but you must always be careful when managing one of your most important financial transactions of the year. Further you need to find a preparer who not only gives you advice on how you can get the largest (legal) return, but can also give you advice on what actions you can take during the year to minimize your tax bill.


~ Year End Tax Considerations in a Rising Government Spending and Tax Rates Environment
~ 2009 Federal Income Tax Guide Features All The Stimulus Recovery Tax Break Details;
~ Nearly 50% of American Households Pay No Federal Taxes
~ 2009 and 2010 Federal Income Tax Bracket Tables and Standard Deduction Changes
~ Can’t afford to pay my taxes! What happens if I file late and can I get an extension

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