tax-preparers-and-PTINsAre you a paid tax preparer? If you intend on preparing tax returns after January 1, 2011, you will be required by federal law to use a Personal Tax Identification Number (PTIN) when submitting tax returns. Previously, paid tax preparers were permitted to use their Social Security number; however, as part of a new oversight program initiated to regulate the tax preparation industry, all tax preparers will be required to register for and use a PTIN.

The IRS is sending out reminders to the estimated 1 million tax preparers to ensure that all preparers are notified of this requirement. Sending approximately 125,000 notification letters per week over an 8-week period, the IRS provides information needed to guarantee all tax preparers are ready to work in 2011.

Let’s look at who needs a PTIN and how to go about getting a PTIN in time for the next tax season:

Who Needs a PTIN?

Under the new IRS regulations in place as of September 28, 2010, all paid tax preparers will be required to have a PTIN. As with most IRS rules there may be exceptions, however most tax preparers should be prepared to register for a PTIN. The following tax preparers will be required to have a PTIN:

Any tax preparer who charges a fee for the preparation of taxes. It does not matter if you prepare 100 tax returns or 5 tax returns; if you are charing a fee you must have a PTIN.
Anyone in a position of authority to make decisions regarding tax liability and who prepares all or most of a tax return (while charging a fee). This includes tax associates in firms regardless of whether or not they are the person signing the tax return.

The following tax preparers do not have to register for a PTIN:

  • Volunteers (VITA)- Individuals who provide Volunteer Income Tax Assistance (VITA) are not required to register for a PTIN unless they are preparing tax returns outside of their volunteer work for which they charge a fee.
  • Tax department employees- Corporate employees in the tax department are not required to register unless they have clients outside of the corporate setting. Otherwise they are technically not considered “paid” tax preparers.
  • Assistants in accounting firms- If the assistant has no role other than the gathering of documents (they do not prepare returns or make determinations on tax liabilities), they do not need to register for a PTIN. How to register for a PTIN?

As stated on the IRS website: “Tax return preparers can register immediately using a new PTIN sign-up system available through www.IRS.gov/taxpros. Preparers will need to create an account, complete the PTIN application and pay a $64.25 fee before getting their PTINs.”

It is very important for all tax preparers to understand if they are required to register for a PTIN before preparing tax returns in 2011. These new rules are in place to help the IRS govern paid tax prepared and encourage consumer confidence when dealing with tax preparers who have gone largely unregulated in the past.