What a CPA Needs to Know About PTIN Regulations Frequently Asked Questions

The AICPA provides answers to several frequently asked questions (FAQs) CPAs commonly raise about the IRS Preparer Tax Identification Number (PTIN) and the regulation of tax return preparers. For further guidance on these important initiatives, see the links to resources provided immediately following these FAQs. 1. Does a CPA need a Preparer Tax Identification Number (PTIN)? CPAs and other tax return preparers need to obtain or renew their PTIN if they are compensated for preparing for or assisting in the preparation of all, or substantially all of any U.S. federal tax return or claim for refund. 2. Does a CPA need a PTIN if the CPA does not prepare or review tax returns or claims for refund, but represents clients before the IRS using a Form 2848? No, a CPA does not need a PTIN to prepare or to be listed on a Form 2848, Power of Attorney and Declaration of Representative. However, if the CPA also is paid to prepare or assist in preparing all or substantially all of a tax return or claim for refund, the CPA will be required to obtain a PTIN. For a list of U.S. tax forms that do not require a PTIN, please see the first FAQ the IRS prepared: irs.gov/taxpros/article/0,,id=239678,00.html 3. Does a supervised non-cpa employee of a CPA firm need to obtain a PTIN? If the supervised non-cpa employee prepares or assists in preparing all or substantially all of a U.S. federal tax return or claim for refund and the return is prepared for compensation, the employee need to obtain a PTIN.

4. What does the phrase preparation of all or substantially all of a tax return mean? The definition of this phrase is not completely clear. In determining whether a preparer has prepared all or substantially all of a tax return, Treasury Regulations section 1.6109-2(g) states that the preparer should take into account: 1. The complexity of the work performed by the individual relative to the overall complexity of the return 2. The amount of the income, deductions or losses attributable to the work performed by the individual relative to the overall return 3. The amount of the tax or credit attributable to the work performed by the individual relative to the overall return Further, while the regulations do not provide a clear, bright line test as to who needs a PTIN and who does not, they do provide several examples that spell out additional factors to take into account in determining whether one needs to obtain a PTIN. For example, if an individual does not exercise any discretion or independent judgment as to the clients underlying tax positions and merely provides clerical assistance or incidental services, the individual generally will not be required to obtain a PTIN. However, if the individual interviews clients, determines the amount and character of entries on the return, and decides whether the information provided is sufficient to prepare the return, then that individual will need to obtain a PTIN if he or she prepares all or substantially of a tax return. The CPA must use his or her judgment to determine whether the all or substantially all standard is met under these factors and examples. 1

5. Does a retired CPA need to obtain a PTIN? What other requirements does a retired CPA need to take into account? The obligation to obtain a PTIN is not dependent on whether the individual is active or retired. Rather, any individual (whether retired or not) who prepares or assists in preparing all or substantially all of a tax return or claim for refund must obtain a PTIN from the IRS. If the retired CPA has kept his state CPA license active and in good standing, he is exempt from the IRS registered tax return preparer testing and continuing education requirements. However, a retired CPA who lets his license lapse will be required to obtain a PTIN and become a Registered Tax Return Preparer (by passing a competency examination and taking IRS authorized continuing education) if he wants to prepare returns or claims for refunds for compensation. 6. Does an intern need to obtain a PTIN? It depends. On the one hand, if an intern: (1) performs data entry from the client s tax organizer; (2) follows up to gather additional data if the information submitted by the client is insufficient; and (3) does not provide advice or answer tax questions, the intern may not be required to obtain a PTIN. In another example, assume the firm permits the intern to handle simple tax situations (such as preparing an entire Form 1040EZ). In this case, the intern would be treated as preparing all or substantially all of the return, regardless of whether the intern signed the return, and would be required to obtain a PTIN. Note that the intern in this situation may be eligible to obtain a supervised PTIN and not be required to take the IRS competency exam or take IRS-prescribed continuing education. 2

7. In a CPA firm, may the decision to obtain PTINs for employees be based on the staff position or level (e.g., interns, associates, senior, etc.) if the services performed by each individual within each level are similar? The regulations used in determining if a person is required to obtain a PTIN are applied at the individual level and not by class of employee. If a firm restricts the actions of a class of employees so that no one within the class is preparing or assisting in preparing all or substantially all of a tax return, it may not be necessary for individuals within that particular class of employees to obtain PTINs. However, as FAQ 6 illustrates, the act of preparing a simple Form 1040EZ would require an individual employee to obtain a PTIN. Additional Guidance on the IRS PTIN and Regulation of Tax Return Preparers: 1. Requirements for Tax Return Preparers: Frequently Asked Questions, Internal Revenue Service: irs.gov/taxpros/article/0,,id=218611,00.html 2. AICPA PTIN Resource Page: aicpa.org/ptininfo 3