When David Williams Speaks, We Listen

David Williams, the new chief of the Return Preparer Office (RPO), spoke in front of NAEA members on August 7th and NATP members on August 17th at their annual conferences. David will be directly responsible for preparer registration, issuing PTINs, and continuing education for all PTIN holders.
The designation “Return Tax Preparer” has been on the books since 1952, and now David will be enforcing compliance for the soon-to-be-created Registered Tax Return Preparer (RTRP). Throughout our industry this new designation is being called both RTP and RTRP so I personally asked David about the difference when he was in Las Vegas, and he assured me the designation will be RTRP.
Within the Return Preparer Office David is creating a new Enrolled Agent Division to address their specific issues. David has often said that EAs are the crème de la crème of the tax professional community, but has specifically promised that IRS will work to help the public understand what an Enrolled Agent is and what the designation means.
The IRS goal of creating a level playing field among practitioners will begin next year with continuing education requirements for RTRPs. EAs are licensed by the Department of the Treasury, and their CPE requirements will remain the same. RTRPs will instead be licensed by the IRS. David also presented good news that IRS is rethinking CPE credits for preparatory EA and RTRP classes. In the past these excellent classes were prevented from issuing CPE credit, but David agreed that learning tax law should qualify for continuing education!
One of the biggest challenges facing IRS, according to David, are ghost preparers who do not sign tax returns. Part of the $64.25 PTIN fee will be used to inform the public of the necessity to have their tax returns signed by the preparer. Over time we will see stronger and stronger IRS messages addressed to taxpayers. Eventually, IRS wants the public to understand their responsibility to hire competent tax preparers.
Recently IRS sent out 100,000 letters to tax preparers who failed to use their correct PTIN. We know of one preparer who prepared only five tax returns who received such an IRS letter. David did admit that one of the benefits of the PTIN process is that IRS will be able to data mine tax returns which will allow them to see similar deductions, credits, and mistakes by individual tax preparers. By seeing repeated mistakes by a particular preparer, IRS may in the future suggest specific training for that preparer. Data mining will also help IRS identify major areas where large numbers of practitioners are misunderstanding tax law.
Next IRS is promising letters to TAXPAYERS! IRS is developing secret criteria, and will be sending notices to taxpayers essentially stating “We believe your tax return should have been signed by a paid preparer” and asking the taxpayer to voluntarily submit the preparer’s name. And don’t you just know that these taxpayers will ever so quickly turn over that information to deflect interest in their case? There has been some speculation about the criteria IRS will use to determine who will receive these taxpayer letters. Some believe it will be based on the complex nature of a tax return. Some believe it will be based on the submittal by an Electronic Return Originator (ERO). Karen Hawkins suggested in May on Tax Talk Today that ZIP codes coupled with preparer mistakes could lead to ghost preparers. For now IRS is not telling!
David did tell us that IRS wants to reconcile EFINs and PTINs. The trouble for IRS is that in many cases the Electronic Filing Identification Numbers attach to the firm where PTINs attach to the individual.
Now let’s talk a little bit about background checks. Current EROs believed they were exempt from background checks because they have already been investigated by the FBI. Well, maybe for now . . . but David assured us that only background checks performed within the last two years will qualify. If you gave IRS your fingerprints more than two years ago, you will have to be fingerprinted again and submit to another FBI background investigation. The IRS will also perform a tax compliance check to see that you have been paying your taxes or at least have payment plans in place. A question was presented to me about how IRS will handle preparers who pay their taxes along with their 2210 penalties on October 15th? Are they considered compliant? Please let us hear your stories . . .
UPS offices will be processing fingerprinting for IRS. Currently, their employees are undergoing fingerprinting themselves along with background checks to prevent the possibility of identity theft. Fingerprinting will also be done by Prometric at the testing sites. For those professionals living in small remote communities, IRS is considering using police departments to take fingerprints, but there is a “chain of command” handling issue to resolve first.
PTINs renewals begin in October, and must be completed before January 1, 2012. Switching to a yearly renewal, IRS wanted to make it easy for us to remember when to renew. No one is excused from having a 2011 PTIN so if you have been waiting, IRS will sock you with two years of PTIN registration fees. Although we had heard that PTIN renewal fees would be significantly less next time around, David made no such promise.
15 hours of continuing education will be required of all PTIN holders beginning in 2012. This is true whether or not you have passed the competency exam or passed the suitability checks. The annual education required must include 3 hours of federal tax updates, 2 hours of ethics, and 10 hours of federal tax law, what David calls Buyer’s Choice.
You all know I like to be brief in my reporting, but there is just too much going on with David Williams and the new Return Preparer Office that I thought you’d like to know! He has quite a job before him in applying a common set of rules to an incredibly diverse preparer community.

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Tax Professional of the Year

The National Association of Tax Professionals (NATP) has graciously awarded our very own Shirley Callahan their highest award “Tax Professional of the Year.”  Yep, that’s our Shirley.  Her mission, her goal, her driving passion is to help tax professionals be the best they can be by giving them the information they need to succeed.  And now she has been recognized by NATP whose membership includes 20,000 tax professionals.  Shirley says: “And to think it all started because I wanted to talk tax with tax professionals!