IRS PTIN renewal process opens in October.

• Author: Goldstein, Benson S.
• Position: Preparer tax identification number

WITH THE 2012 tax filing season fast Approaching, many CPAs might find themselves bewildered by the dimension of change that took place over the past year with respect to federal tax administration. Tax return preparers had to cope with new mandated preparer tax identification number (PTIN) and individual tax return e-file programs during the 2011 filing season. With respect to the PTIN program alone, over 700,000 tax return preparers (including CPAs) registered for PTINs over the past 12 months, authorizing these signing and nonsigning preparers to prepare tax returns during the 2011 filing season.

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Beginning in October 2011, the IRS PTIN database will be available for CPAs (and their employees) to obtain or renew their PTINs for the 2012 filing season. In addition, the IRS expects to launch a written competency examination and continuing education requirements for prospective registered tax return preparers during fall 2011. Licensed CPAs and individuals who work in CPA firms generally will not be subject to testing and IRS-approved continuing education.

CPA firms need to ensure that the signing and nonsigning tax return preparers within their firms obtain or renew PTINs for the upcoming filing season. In general, any individual who is compensated and prepares or assists in the preparation of "all, or substantially all" of a tax return or claim for refund of tax must obtain or renew his or her PTIN on an annual basis. Once it is determined that an individual within the CPA firm is obligated to obtain a PTIN, he or she invariably faces the obligation of paying the IRS the yearly PTIN user fee of $64.25. Many CPA firms voluntarily reimburse employees who have paid the fee.

Unfortunately, while this rule may seem fairly straightforward for CPAs who sign as preparers, it is not so straightforward when determining who among the nonsigning staff within the CPA firm is required to obtain a PTIN. Regs. Sec. 1.6109-2(g) provides four examples of who is considered a nonsigning preparer. Example (1) describes an individual employed by Preparer B. This individual answers telephone calls, makes copies, and enters client tax information into data fields of tax preparation software. The example also states that although the employee "must exercise judgment regarding which data fields in the tax preparer software to use, [the employee] does not exercise any discretion or independent judgment as to the clients' underlying tax...