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IRS further explains preparer voluntary education program

Fact Sheet 2014-8, June 2014

In a Fact Sheet, in a frequently asked questions (FAQs) format, IRS has provided additional information on its new, voluntary Annual Filing Season Program, which is designed to encourage tax return preparers to participate in continuing education (CE) courses. In particular, IRS explains where attorneys, certified public accountants (CPAs), and other preparers who have completed certain recognized state or national competency tests fit in with the new program.

RIA observation: This program has generated a surprising amount of controversy. For example, both the American Institute of CPAs (AICPA) and the National Association of Enrolled Agents (NAEA) strongly oppose the program as one that will only confuse taxpayers. The concern is that the program’s record of completion will be perceived as conveying IRS’s seal of approval and mislead taxpayers as to the preparer’s actual level of competency and experience. Further, while presented as a voluntary program, market pressure may force preparers to participate in the program in order to effectively compete. Other criticism contends that such a program by IRS isn’t authorized by statute.

Background. In 2011, IRS issued regs that mandated testing and CE for paid tax return preparers and created a Registered Tax Return Preparer (RTRP) credential. The RTRP designation was for preparers with valid preparer tax identification numbers (PTINs) who passed an IRS competency test and completed 15 hours of CE.

Earlier this year, the Court of Appeals for the D.C. Circuit upheld a lower court’s determination that these regs were invalid. (Loving v. IRS, (CA DC 02/11/2014) 113 AFTR 2d 2014-867; see Weekly Alert ¶  10  02/13/14)

In IR 2014-75 (see Weekly Alert ¶  33  07/03/2014), IRS announced a voluntary education program, the Annual Filing Season Program (Program) for unenrolled return preparers that would go into effect for the upcoming filing season. It also announced that it would publish a directory of preparers that would include persons who completed the program including persons with recognized credentials.

In Rev Proc 2014-42, 2014-29 IRB (see Weekly Alert ¶  26  07/03/2014), IRS provided more detailed procedures on the Program and explained how it was designed to encourage tax return preparers who are not attorneys, CPAs, or enrolled agents (EAs) to complete CE courses for the purpose of increasing their knowledge of the law relevant to federal tax returns.

Overview of IRS’s new education program. The Program is a voluntary program under which return preparers can elect to take CE each year in preparation for the filing season. On completion of the Program, preparers receive a Record of Completion and are included in a new public directory that will be added to IRS’s website by January of 2015 for taxpayers to use in searching for qualified tax return preparers. As emphasized in the Fact Sheet, the Program is not designed, directed, or intended for credentialed preparers who already possess a higher level of qualification.

In general, to obtain a Record of Completion, a return preparer must obtain 18 hours of CE from an IRS-approved CE Provider, including a 6-credit-hour Annual Federal Tax Refresher (Refresher) course that covers filing season issues and tax law updates. The Refresher course must include a knowledge-based comprehension test administered at the conclusion of the course by the CE Provider. The amount of CE required to obtain the Record of Completion is prorated for the 2015 filing season so that a total of 11 hours must be taken for the 2015 filing season, including the 6-hour Refresher course; 3 hours of federal tax law topics; and 2 hours of ethics. In addition, the preparer must also consent to Circular 230 practice requirements and possess a valid preparer taxpayer identification number (PTIN) for the upcoming filing season.

Preparers exempt from Refresher course. The Fact Sheet explains that some unenrolled preparers are exempt from the Program’s Refresher course requirement because of their completion of other recognized state or national competency tests. They only have to meet the Program’s alternative requirements: 15 hours of IRS-approved CE (10 on federal tax law; 3 on federal tax law updates, and 2 on ethics); consent to Circular 230 practice requirements; and possession of a valid PTIN for the upcoming filing season in order to receive a Record of Completion. These exempt return preparers include:

…anyone who passed the Registered Tax Return Preparer test administered by IRS between November 2011 and January 2013;
…established state-based return preparer program participants currently with testing requirements: return preparers who are active members of the Oregon Board of Tax Practitioners and/or the California Tax Education Council;
…”SEE Part I” Test-Passers: Tax practitioners who have passed the Special Enrollment Exam (SEE)Part I within the past two years as of the first day of the upcoming filing season;
…Volunteer Income Tax Assistance (VITA) volunteers: Quality reviewers and instructors with active PTINs; and
…other accredited tax-focused credential-holders: The Accreditation Council for Accountancy and Taxation’s Accredited Business Accountant/Advisor (ABA) and Accredited Tax Preparer (ATP) programs.

Listing in IRS’s public directory. The directory—the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications—will include the name, city, state and zip code of all attorneys, CPAs, EAs, enrolled retirement plan agents (ERPAS), enrolled actuaries and Program participants who have obtained a Record of Completion and who have a valid PTIN. This public directory with credentials and select qualifications will be a searchable, sortable listing so that taxpayers can find a return preparer that carries their preferred credentials or qualifications. In order to be included in the directory, attorneys, CPAs, EAs, ERPAs, enrolled actuaries and individuals must obtain a Record of Completion under the Program. To do so, such a credentialed preparer must meet the same Program requirements as those preparers in the exempt category.

Representation of clients. The Fact Sheet explains that attorneys, CPAs and EAs will have unlimited representation rights and can represent clients before any IRS office, regardless of participation in the Program.

Other return preparers who hold a PTIN will continue to have limited representation rights before limited IRS offices with respect to clients whose return they prepared and signed for calendar year 2015. However, beginning in 2016, only Program participants who obtain a Record of Completion will have those limited representation rights before IRS for clients whose returns they prepared and signed; PTIN holders without a Record of Completion or without other professional credentials will not be able to represent clients before IRS in any matters.

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