Competency Testing To Begin In September, 700,000 Preparers Registered So Far

David Williams, Director of the IRS Return Preparer Office, told an IRS webinar audience on March 30th that he expects competency testing to begin in September of this year. Williams also said the contract for the testing vendor will be awarded "in the next couple of weeks."

The test will be on 1040s only, not business returns. The test will not be open book, but test taker will likely have access to IRS instructions. Williams said the test will focus on "thinking your way around a return," not calculations. Calculating software will not be provided with the tests. Rather, the questions will ask things like when a taxpayer may be subject to the alternative minimum tax. Test sites will be around the country, and candidates will have to come into testing centers. Those preparers with provisional PTINS will have until the end of 2013 to pass the test and can take it as many times as they like. However, the IRS may require a waiting period after a preparer has failed the exam before the preparer can take it again.

Practitioner Recommendations on Test

The IRS will solicit recommendations from the practitioner community on what should be included on the test. Also, the IRS will release general outlines of the test content, but will not give out sample tests or offer an IRS review course. The IRS will leave test prep courses up to "the marketplace". Preparers will be able to get continuing education credit for taking test review courses.

PTIN Registrations

Williams also reported that 700,000 preparers have registered in the PTIN system since September 28, 2010. IRS estimates that there are between 800,000 and 1.2 million paid preparers in the U.S., so it believes there are still many paid preparers who are not registering or not getting the message that they have to register. The IRS intends to contact as many unregistered preparers as possible and will be looking for returns filed by preparers without PTINS. Williams also said that IRS intends to "level the playing field" by finding nonsigning preparers. One method will be to use statistical analysis to identify returns that are likely prepared by a nonsigner. The IRS will then question the taxpayers about who prepared their return.

The registration requirement is targeted not only to the person who actually signs the return, but also applies to any person "exercising substantive judgment that really determines the outcome on the tax return," Williams observed.

Confusion with E-File Requirement

Panelist Bill Parrish, with the Private Practice Group, noted that some practitioners are getting the PTIN registration requirement confused with the E-File requirement. This year, preparers who expect to file 100 or more returns have to e-file those returns. (That number drops to 11 or more in 2012.) Some preparers think they only have to register for a PTIN if they have to e-file. This is incorrect. All paid preparers who prepare all or substantially all of a return or make substantive judgments on a return have to register for a PTIN. The PTIN registration has nothing to do with the e-file requirement. Note: They are separate requirements with different criteria.

Continuing Education

The IRS will not be able to fully implement the continuing education requirement until it compiles its approved list of courses and providers. It is looking to 2012 to get the program underway, but it still has to create the list of qualified providers. At 20,000 attendees per year, the IRS Tax Forums do not have the capacity to serve all of the preparers who will need CPE courses.