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IRS launches online directory of tax return preparers

IR 2015-22, Fact Sheet 2015-06, February 2015

In a News Release, IRS has announced the launch of a new, searchable online public directory of tax return preparers who both: a) are attorneys, CPAs, enrolled agents (EAs) or have completed the requirements for the voluntary IRS Annual Filing Season Program (AFSP) and b) have a valid 2015 Preparer Tax Identification Number (PTIN).

Background. In 2011, IRS issued regs that mandated testing and continuing education (CE) for paid tax return preparers and created a “Registered Tax Return Preparer” (RTRP) credential.The RTRP designation was for preparers with valid PTINs, who passed an IRS competency test and completed 15 hours of CE.However, in 2014, 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 June of 2014, IRS announced a voluntary education program, the AFSP, for unenrolled return preparers and others, 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.(IR 2014-75 (see Weekly Alert ¶  33  07/03/2014)

In July of 2014, IRS provided more detailed procedures on the AFSP and explained how it was designed to encourage tax return preparers who are not attorneys, CPAs, or EAs to complete CE courses for the purpose of increasing their knowledge of the law relevant to federal tax returns.(Rev Proc 2014-42, 2014-29 IRB 192 (see Weekly Alert ¶  26  07/03/2014))

Rev Proc 2014-42 provides that, for 2015, the AFSP generally requires return preparers to complete 11 hours of CE, which includes a 6-hour Annual Federal Tax Refresher course, three hours of other federal tax law topics, and two hours of ethics.Certain categories of return preparers who have passed recognized tests administered by states and other organizations can participate in the program by obtaining eight hours of continuing education.All CE courses must be obtained from IRS-approved CE providers.

New tool to help prepare taxes. In IR 2015-22, IRS has announced that it has launched the directory of preparers.It advised that taxpayers may search the directory using the preferred credentials or qualifications they seek in a preparer, or by a preparer’s location (including professionals who practice abroad).In the accompanying Fact Sheet 2015-06, February 2015, IRS noted that tax professionals have varying levels of skills, education and expertise, and that not all tax professionals have the right to represent taxpayers before IRS, such as during an audit.IRS advises taxpayers to be aware of the credentials, qualifications and extent of service each prospective professional provides before obtaining their service.

The searchable, sortable database contains: the name, city, state, and zip code of the following persons if they have valid PTINs for 2015: attorneys, CPAs, EAs, enrolled retirement plan agents, enrolled actuaries and AFSP participants.While the directory will help taxpayers determine a return preparer’s qualifications, the listings aren’t intended as an endorsement by IRS.And, tax return preparers with PTINs (other than attorneys, CPAs, and EAs) who aren’t AFSP participants are excluded from the directory.

RIA observation: The AFSP 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 (awarded on successfully completing the program) 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.

Representation of clients. The Fact Sheet explained that attorneys, CPAs and EAs have unlimited representation rights and can represent clients before any IRS office, regardless of participation in the AFSP; they may represent their clients on any matters including audits, payment issues, and appeals, regardless of whether they prepared the return in question.Other return preparers who hold a PTIN will continue to have limited representation rights before IRS with respect to clients whose return they prepared and signed for calendar year 2015; they may only represent clients before IRS revenue agents, customer service representatives and similar IRS employees (including employees in the Taxpayer Advocate Service).However, beginning in 2016, only AFSP participants who have successfully completed the program will have those limited representation rights before IRS for clients whose returns they prepared and signed; PTIN holders who have not successfully completed the program or without other professional credentials will not be able to represent clients before IRS in any matters.

ACA’s effect on returns. In the News Release, IRS also specifically notes that the directory can be a resource for taxpayers who may want to get help from tax professionals on the Affordable Care Act (ACA) tax provisions that affect returns filed this year.While the vast majority of taxpayers will only have to check a box on their federal income tax returns to indicate they had health coverage, others may have Marketplace coverage with tax credits, have exemptions or need them, or may have to make a payment because they could afford to buy health insurance but chose not to.

References: For who is a tax return preparer, see FTC 2d/FIN ¶  S-1117; United States Tax Reporter ¶  77,014.24; TaxDesk ¶  867,002; TG ¶  71753. For standards of practice, see FTC 2d/FIN ¶  T-10900; TaxDesk ¶  867,008; TG ¶  71758.

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