Sweeping reform will require registration, testing and continuing education
About 60 percent of U.S. consumers seek the help of an accountant or professional tax preparer to prepare and file their taxes, according to a recent survey sponsored by CCH, a Wolters Kluwer business.
Most preparers are honest and professional and provide excellent service to clients. But in the wake of an IRS crackdown on unscrupulous preparers involving dozens of civil indictments and criminal convictions, the IRS has launched a major initiative to register and monitor tax preparers.
A blueprint for sweeping oversight reforms released Jan. 4 outlines key components of the initiative:
• All paid preparers, regardless of credentials or licenses, will be required to register with the IRS. They must pay a fee for registration and renew registration every three years. No thresholds apply to the number of returns prepared or to the compensation received.
• Unenrolled preparers will be required to complete competency testing. CPAs, attorneys and enrolled agents are exempt from competency testing — at least for the time being. The IRS intends to assess the quality of returns prepared by CPAs, attorneys and enrolled agents to determine if competency testing should be mandated in the future.
• Unenrolled preparers will be required to complete 15 hours of continuing professional education (CPE) annually, including three hours covering federal tax law updates, two hours of tax ethics and 10 hours on other federal tax topics. CPE will not be required for CPAs, attorneys or enrolled agents in good standing with their licensing agencies.
In addition, the IRS reform casts a wider net for Circular 230, which details practice standards for tax professionals who represent clients before the IRS. Previously, only attorneys, CPAs and enrolled agents were subject to Circular 230. But the new initiative treats return preparation for compensation as “practicing before the agency.” That will subject all signing and nonsigning preparers to discipline for unethical or unprofessional conduct.
Some details of the initiative remain unclear, most significantly the timeline for registration. A tentative Sept. 1, 2010, implementation date, however, appeared in a Jan. 13 Request for Proposal seeking vendor bids for an online registration system.
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This story is from the CCH e-newsletter First Choice, written specifically for tax, accounting and audit professionals. First Choice offers tips, tricks and ideas about how to increase your public accounting firm’s productivity and efficiency. Every issue also features insights with a tax, audit or accounting professional.