IRS proposes new tax return preparer standards.

• Author: Kegerreis, Angela

On January 4, 2010, the IRS released a list of recommendations calling for the registration, testing, and continuing education of currently unregulated tax return preparers. Most of the new requirements would not apply to attorneys, CPAs, enrolled agents, and other individuals authorized to practice before the IRS who are already subject to the standards of practice promulgated in Treasury Circular 230 (31 C.F.R. Part 10) and additional standards imposed by various professional organizations and licensing authorities. However, the proposals should be of great interest to all tax professionals because they could have a significant impact on the industry as a whole.

The IRS recommendations are the result of an extensive public dialogue, commencing with Notice 2009-60, which requested comments on (1) how the tax return preparer community can assist in increasing taxpayer compliance and (2) how to ensure that tax return preparers meet both uniform and high ethical standards of conduct. Over the ensuing six months, the IRS held three public forums and received over 500 written comments in response to the notice.

Based on that dialogue, the IRS determined that taxpayers, tax administration, and the industry as a whole would benefit from changes in how industry participants are overseen. The IRS is therefore recommending regulations that would:

* Require registration of all individuals who prepare for compensation and sign one or more federal tax returns;

* Establish competency testing for all paid preparers other than attorneys, CPAs, and enrolled agents;

* Require 15 hours of annual continuing professional education for preparers other than attorneys, CPAs, enrolled agents, enrolled actuaries, and enrolled retirement plan agents;

* Place all tax return preparers under the standards of Circular 230; and

* Implement procedures for enforcement of the new standards.

In addition, the IRS intends to establish groups to address risks associated with the increasing dependence of tax administration on consumer and commercial tax return preparation software. The IRS would also review refund settlement products to determine whether regulation is needed and develop a public awareness campaign to educate taxpayers and return preparers about the new standards.

Mandatory Registration

At present, any individual may prepare a tax return for a fee. Because there is no current registration requirement, the number of individual tax return preparers is not known. It...