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Beginning January 1, 2011 new requirements have been promulgated concerning all paid tax return preparers. This includes lawyers, enrolled agents or certified public accountants and could include administrative assistants or paralegals. The new regulations begin to take effect for this filing season.

With the promulgation of the new requirements come two issues to be dealt with.

1. The first issue is whether these unlicensed individuals must obtain a Preparer Taxpayer Identification Number (PTIN). The general rule (per the new regulations) is that a “PTIN” must be obtained by all tax return preparers who are compensated for preparing, or assisting in the preparation of, all or substantially all of any U.S. federal tax return, claim for refund, or other tax form submitted to the IRS. This issue is largely decided on a factual basis. The task of data entry, gathering factual information from clients, and cursory production of a return do not compel the requirement that an unlicensed individual obtain a PTIN. However, if the unlicensed individual offers any sort of tax advice, planning, or strategy, however slight and even while under the supervision of a licensed professional, it appears that the unlicensed individual will be required to obtain a PTIN. The line between these two distinctions is a fine line and in this regard it is probably best to err on the side of conservatism and apply for the PTIN number for all personnel so employed.

2. In mid-2011, the second phase of the oversight program is scheduled to begin. This issue deals with, whether an unlicensed individual, who is required to obtain a PTIN, is required to pass the new yearly competency exam to work on office tax matters. current proposals of the Internal Revenue Service suggest that testing may be a requirement for unlicensed individuals regardless of their working status. Once you pass the exam you become an IRS Registered Tax Return Preparer.

There are exceptions to the exam requirement. The exceptions are:

  • Attorneys, certified public accountants and enrolled agents who are active and in good standing with their licensing agency.
  • Supervised preparers (those who do not sign returns but are employed by attorney or CPA firms or other recognized firms at least 80% owned by attorneys, CPAs, or enrolled agents, and who are directly supervised by an attorney, CPA or enrolled agent.

It only takes about 15 minutes to sign up online for you PTIN. If you opt to use the paper application, Form W-12, it will take 4-6 weeks to process.

For more information on the PTIN go to,,id=218611,00.html and click on Tax Professionals.

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