The IRS in Notice 2011-6 offered additional guidance as 2010 ended on the application of the PTIN rules for 2011. The notice creates some new categories of PTIN holding preparers, including carving out special treatment for individuals that work under the supervision of CPAs, EAs, attorneys or enrolled actuaries.
The notice begins by noting that those have applied for and been granted a PTIN, or renewed their PTIN, after September 28, 2010 will be treated as meeting the requirements under Reg. §1.6109-2 to have obtained a PTIN that qualifies one to prepare tax returns in 2011.
The IRS carves out a special rule for individuals who prepare returns under the supervision of a CPA, EA, attorney or enrolled actuary. These individuals will not be required to take the competency test, nor will they be subject to mandatory continuing professional education. These individuals will still need to obtain a PTIN, pay the user fees annually to obtain and renew that PTIN and pass the tax compliance and suitability checks. These individuals will not be able to sign a return, represent clients in any form before the IRS, nor hold themselves out to the IRS or the general public as a registered tax return preparer.
This “non-registered tax return preparer” individuals will have to meet the following requirements:
- The individual must be 18 years of age or older;
- The supervising CPA, EA, attorney or enrolled actuary must sign any returns or claims for refund prepared by this individual and
- The individual must be employed at the CPA firm, law firm or “other recognized firm” of the preparer who signs the return.
CPA firms and law firms are defined by local law definitions authorizing practice in those licensed areas. The third category, the “other recognized firm,” is a firm other than a CPA firm or law firm, must have one or more employees engaged in practice before the IRS and is 80% or more owned by one or more CPAs, EAs, attorneys, enrolled retirement plan agents or enrolled actuaries who are currently allowed to practice before the IRS.
An individual obtaining a PTIN under this rule must certify on the application that they will be preparing return solely under the supervision of one of the preparers noted above and may be required by the IRS to give a supervising preparer’s PTIN or other number assigned by the IRS. If the individual is no longer supervised by that authorized preparer, the PTIN holder must notify the IRS of this fact and cease preparing returns. The IRS will retain the right to revoke the PTIN of this individual if the person willfully violates the rules found in Circular 230 or engages in disreputable conduct.
The IRS also has carved out an exception for preparers who do not prepare individual income tax returns. The IRS indicates that the initial competency exam will be limited to individual income tax issues. While the IRS anticipates adding additional examinations to cover other areas, for now the IRS will issue a PTIN to and exempt from the requirement to pass a competency examination individuals who:
- Are 18 years of age or older;
- The individual certifies that the individual does not prepare or assist in the preparation of any return currently covered by a competency exam
The individual will still need to apply for a PTIN and pay the fee annually, as well as pass the suitability and tax compliance check. For now these individuals will also be exempted from the continuing education requirements. However, they will not be allowed to represent to the public or the IRS that they are registered tax return preparers. The IRS retains the right to revoke PTINs issued under this provision for violations of rules or disreputable conduct.
Enrolled retirement plan agents and enrolled actuaries that obtain a PTIN under this provision will continue to be allowed to practice before the IRS in the limited areas provided under Circular 230 for those individuals.
The IRS also published a list of forms which will not be subject to the PTIN requirements of Reg. §1.6109-2. These forms are:
- Form SS-4, Application for Employer Identification Number;
- Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding;
- Form SS-16, Certificate of Election of Coverage under FICA;
- Form W-2 series of returns;
- Form W-7, Application for IRS Individual Taxpayer Identification Number;
- Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding;
- Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment;
- Form 872, Consent to Extend the Time to Assess Tax;
- Form 906, Closing Agreement On Final Determination Covering Specific Matters;
- Form 1098 series;
- Form 1099 series;
- Form 2848, Power of Attorney and Declaration of Representative;
- Form 3115, Application for Change in Accounting Method;
- Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits;
- Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers,Members of Religious Orders and Christian Science Practitioners;
- Form 4419, Application for Filing Information Returns Electronically;
- Form 5300, Application for Determination for Employee Benefit Plan;
- Form 5307, Application for Determination for Adopters of Master or Prototype or Volume Submitter Plans;
- Form 5310, Application for Determination for Terminating Plan;
- Form 5500 series;
- Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips;
- Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests;
- Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests;
- Form 8508, Request for Waiver From Filing Information Returns Electronically;
- Form 8717 User Fee for Employee Plan Determination, Opinion, and Advisory Letter Request;
- Form 8809, Application for Extension of Time to File Information Return;
- Form 8821, Tax Information Authorization;
- Form 8942, Application for Certification of Qualified Investments Eligible for Credits and Grants Under the Qualifying Therapeutic Discovery Project Program
This list is subject to revision by the IRS.
Since neither the competency examination nor the continuing education programs are ready at this time, the IRS has implemented interim rules. Under these interim rules, individuals will be given provisional PTINs. The IRS plans to issue provisional PTIN only through the date at which the competency examination is made available. The IRS indicates it expects the competency exam to be available sometime in the middle of 2011. Once that examination is available anyone not already possessing a provisional PTIN or otherwise exempted from the examination process will have to pass the examination to become a registered return preparer.
Individuals who obtain provisional PTINs prior to the availability of the examination will be allowed to prepare returns through December 31, 2013 so long as they continue to renew their PTINs during that period. Once the examination is available these individuals will be able to pay the fee and take the exam as often as it offered prior to December 31, 2013. Such individuals will need to pass the exam prior to that date to continue to prepare returns.
While these individuals will be allowed to prepare and sign returns for compensation and represent him/herself as authorized to practice before the IRS for preparing and filing tax returns and claims for refund. However the provisional PTIN holder will not be allowed to represent that he/she is a registered tax return preparer. Effectively, there will not be registered tax return preparers until the IRS releases the examination, the exam is administered and individuals pass the exam.
Individuals who have prepared returns will be allowed to exercise the limited represented of taxpayers before the IRS for returns that the individual prepared if the person was authorized under the regulations to prepare and sign the return for compensation, even if currently that person would not be authorized to do so. However this provision does not expand the rights of these individuals to the expanded representation available to CPAs, EAs, attorneys, enrolled retirement agents and enrolled actuaries.
The notice reiterates that no continuing education requirement will be imposed for the first year of registration which began on September 30, 2010.
Arizona Society of CPAs
J. Michael Stolp
mhstpt
Robert K Minniti, CPA, CFE, Cr.FA, CVA, CFF, MBA
Ed Zollars, CPA
Jason Washo, CPA, PFS
dsscpa
cguerriero
Cindie Hubiak, CPA
Jose Herrera
Heidi Frei
Joseph Velez, Attorney
Greg Lane, CPA, CFP®
cpaglobaltax
Molly Montgomery, CPA
The notice 2011-6 list of forms not requiring ptin includes many forms that are not ‘tax return or claim for refund forms’.
The list does not include Form 990 (not a claim for refund form), yet 990 instructions are specific and state: “the paid preparer must enter the preparer’s identifying number and the firm’s EIN only if filing Form 990 for a section 4947(a)(1) nonexempt charitable trust that is not filing Form 1041, U.S. Income Tax Return for Estates and Trusts.”
Will the 990 instructions change or will the list be revised to include 990′s?
With all the tax-exempt changes of recent years, you’d think this is one form where the IRS would like some ‘enforcement strategy’ solutions… one of their goals with this new ptin program.
Since there are cases where the number will be required, it wouldn’t be appropriate for the IRS to list the Form 990 on the “you won’t need a PTIN to complete” form list. Notice 2011-6 doesn’t indicate what forms will require entering a PTIN, just those where a preparer must have a PTIN to prepare the return for compensation.
Presumably unless the IRS modifies the PTIN provision instructions on that form, there will not a requirement to actually give a PTIN. My guess is that the issue is one of statutory interpretation–only in the substitute for 1041 context is it a form where the IRC requires provision of an identifying number. But the requirement to have a PTIN is an independent issue, coming under the IRS’s authority to regulate practice (which is found outside of the IRC).
Thanks for the perspective. If the new rule is: paid preparers have to have a PTIN, why isn’t it following that they also have to use it? One strategy for regulating practice could be uniformity regarding ‘paid preparer’ data blocks on IRS forms. The instructions for those blocks differ on different forms. Yet, the data fields are the same.
Nonsigning preparers still need a PTIN even though they won’t use it–in fact, the “under the supervision” of a CPA/EA/attorney preparers won’t effectively be allowed to use it, since they can’t sign a return. What the IRS is getting primarily is the ability to regulate and sanction those who they feel are abusing the system, via yanking it all under Circular 230.