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Reminder to return preparers of looming 2016 limits on practice before IRS

IR 2015-123

In a News Release, IRS reminds non-credentialed tax return preparers (i.e., those who aren’t enrolled agents (EAs), certified public accountants (CPAs), or attorneys) of major upcoming changes, beginning in 2016, on which tax return preparers can represent clients in matters before IRS. Those return preparers need to take action by Dec. 31, 2015 to avoid being affected.

Background.In June of 2014, IRS announced a voluntary education program, the Annual Filing Season Program (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)

In Rev Proc 2014-42, IRS provided 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.

Reminder.In IR 2015-123, IRS notes that, effective for tax returns and claims for refunds prepared and signed after Dec. 31, 2015, the limited right to represent clients before IRS held by non-credentialed preparers will be accorded to only those preparers participating in the IRS AFSP. To participate in the AFSP, non-credentialed tax return preparers must complete either 15 or 18 hours of continuing education from IRS-approved CE providers. The CE must be completed by Dec. 31, 2015, in order to receive a 2016 Annual Filing Season Program Record of Completion. These changes in the limited representation rules have no impact on returns prepared and signed by non-credentialed preparers on or before Dec. 31, 2015.

Non-credentialed tax return preparers who participate in the AFSP will continue to have limited rights to represent clients. This enables them to represent taxpayers whose returns they prepared and signed, but only before revenue agents, customer service representatives, and similar IRS employees, including the Taxpayer Advocate Service. The tax return preparer must participate in the AFSP for both the year of return preparation and the year of representation to represent their client.

RIA observation:As an additional inducement for participation in the AFSP, those preparers are listed on a publicly available agency database—known as the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications—which taxpayers can access when seeking return preparation assistance.

IRS also notes that there are no changes to representation rules for EAs, CPAs, and attorneys. These tax professionals continue to have unlimited practice rights and can represent any taxpayer before any IRS office, including collection and appeals, regardless of whether they prepared the tax return in question.

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  .