For most taxpayers, tax preparation is a tedious and complex process. For this reason, the vast majority of taxpayers – over 80% – choose to use a tax generator or tax preparation software to prepare their taxes for filing. The increasing demand for tax preparers and the widespread use of these professionals has prompted the IRS to establish rules and guidelines to control and manage these professionals. This is especially necessary because unscrupulous people posing as tax professionals take advantage of taxpayers to steal their returns or steal their identities. In 2010, the IRS posted requirements for all taxpayers to comply with by the 2011 tax season. Some of the rules set for tax officers are given below:
- All preparers are now required to register with the IRS and receive a Taxpayer Identification Number (PTIN). Those who already have a PTIN need to apply again for a new one.
- All preparers need to sign the tax return forms of all taxpayers they assist in preparing their taxes.
- Professionals who are not Enrolled Agents, Certified Public Accountants (CPAs), or lawyers are expected to carry out a competency test and undergo further examination before receiving PTIN. They are also expected to undergo a 15-hour training session annually starting in 2011 to keep them abreast of the tax industry’s latest rules and regulations.
Since the introduction of this rule in 2010, approximately 712,000 preparers have complied with it and are fully licensed to operate as tax preparers. However, according to a report released by the IRS in July 2011, approximately 100,000 tax officers did not comply with the new regulations and submitted tax returns with old and outdated PTIN numbers, used their Social Security Numbers, or did not sign tax returns. .
The IRS has made concessions to tax professionals who violate the aforementioned rules and has even sent letters to these professionals, asking them to comply at least by next tax season. IRS Commissioner Doug Shulman, while providing a press statement, noted that some drafters may not have been aware of the new rules and therefore, granted this extension for compliance. In addition to compliance, the IRS has also provided extensive training to tax professionals and has met with tax preparers who have made repeated tax returns wrong in an effort to increase the professionalism of the tax consulting industry.
For taxpayers, it is their responsibility to ensure that the tax preparers they choose to handle their taxes fully comply with the new regulations. The IRS will post on their website the names of all tax professionals who have PTIN numbers to help taxpayers identify genuine professionals and avoid fraudsters. The IRS has also asked taxpayers to ensure that a tax professional assisting with filing taxes signs returns and shows their PTIN number. In this case, the IRS also mails letters to those whose tax returns look like they were prepared by a professional, but don’t have a signature. The letters are to inform taxpayers of the importance of preparing to sign their returns and also to explain how to file a complaint with the IRS for a maker who refuses to sign or who acts unprofessionally in any way.
