U.S. tax preparers: PTIN registration still required

As Canada Revenue Agency continues its consultations toward a system of tax preparer registration in Canada, the U.S. Internal Revenue Service (IRS) continues to deal with fall-out from a court challenge regarding its tax preparer registration requirements.

As Canada Revenue Agency continues its consultations toward a system of tax preparer registration in Canada (see our earlier blog), the U.S. Internal Revenue Service (IRS) continues to deal with fall-out from a court challenge regarding its tax preparer registration requirements.

As guest blogger Jeffrey Brown explains, despite a recent suspension of competency and education requirements, U.S. tax return preparers, including Chartered Professional Accountants (CPA) in Canada, are still required to register with the IRS but are barred from some taxpayer representation activities unless certain qualification requirements are met.

We recognize that many of our members involved in tax preparation are going through their busiest time of year but, given the timely subject matter, we thought it was important to bring this issue to your attention.

Jeffrey Brown is a Principal of BoTax, The Boston Tax Advisory Company Ltd.

The IRS requires U.S. tax return preparers, including Canadian CPAs who prepare U.S. tax returns, to register and obtain a preparer tax identification number (PTIN). The PTIN is renewed annually. This requirement continues despite the recent opinion of the U.S. Court of Appeals for the District of Columbia Circuit in Loving v. IRS that IRS cannot regulate tax return preparers using the same statutory authority with which it regulates “practice before the IRS”.

In 2013, the U.S. District Court for the District of Columbia enjoined IRS from enforcing competency testing and continuing education requirements for many registered tax return preparers. A later ruling clarified that IRS could require paid tax return preparers to obtain a PTIN. The Appeals Court reaffirmed longstanding precedent that “practice before the IRS” (which, for example, includes representation of taxpayers in adversarial proceedings) did not include preparation of tax returns. The decision did not affect IRS regulatory practice requirements for state-licensed and registered certified public accountants and U.S. attorneys or agents, retirement plan agents and actuaries who are enrolled to practice before the IRS.

Canadian-based U.S. tax return preparers, including CPAs, can and must obtain a PTIN but may not “practice before the IRS” unless otherwise qualified.

Not all U.S. CPAs can “practice before the IRS”. A few states, including Illinois for example, award a registered CPA designation upon passing the Uniform CPA examination. In order to become a licensed CPA however, a candidate must satisfy minimum education and experience criteria, which vary by state. (See, for example, IRS CCA 200431013 regarding Illinois CPAs.)

On its website, IRS expressed concern that “taxpayer reliance on paid tax return preparers and effective tax administration are inextricably linked to quality return preparation. As we assess the scope and impact of the court’s decision and determine our way forward, our focus on improved competency will continue.” The Loving opinion suggests that such can be achieved if the U.S. Congress enacts legislation empowering IRS with the authority to regulate tax return preparers.

Join in the conversation

Have you had experience with the U.S. requirement regarding “practice before the IRS?” Do you agree that such practice should be restricted based on IRS-mandated education and experience criteria.

Post a comment below.

Conversations about Tax is designed to create an exchange of ideas on tax policy and practice developments and issues and their impact on Canadian accountants who practice tax. Comments received can provide helpful input to the public interest advocacy positions developed by the Chartered Professional Accountants of Canada.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada

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