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New IRS tax preparer requirements based on California law

On Behalf of | Dec 22, 2011 | IRS, New Laws |

The IRS is using California law as a model for new education requirements for tax preparers. The new requirements will go into effect in 2012, their purpose being to prevent tax fraud and protect taxpayers from bad decisions on the part of preparers.

The new IRS requirements are based on criteria California has demanded of tax preparers for over ten years. In fact, the only two states with established standards for tax preparers are California and Oregon.

The 2012 plan aims to create education and testing standards for unlicensed tax preparers. The California Tax Education Council (CTEC) is a state-mandated nonprofit organization that registers unlicensed preparers. A board member from that organization has made it clear that, even though California and Oregon have their own requirements, those states will not be exempt from the new IRS rules.

According to current California law, people who are paid to prepare or assist in preparing state or federal tax returns must have at least one of three titles: certified public accountant (CPA), IRS enrolled agent (EA) or CTEC-registered tax preparer (CRTP). In fact, every CRTP is required to pass an exam following a 60-hour education course, secure a $5,000 surety bond to protect clients against fraud, and take 20 additional hours of education courses each year.

These are the new IRS rules for tax preparers:

•· All paid tax preparers (including attorneys, CPAs, CRTPs and EAs) must pay a fee each year to obtain a legal IRS Preparer Tax Identification Number (PTIN).

•· Starting January 1, 2012, nonexempt tax preparers (that is, not an attorney, CPA or EA) have to complete 15 hours of federal continuing education per year.

•· Nonexempt tax preparers must pass an IRS competency test before 2013.

•· Nonexempt tax preparers will also have until 2013 to complete a background check.

Source: Market Watch, “New IRS Tax Preparer Regulations Face Great Expectations,” Dec. 20, 2011


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