June 26, 2014
Today we’re announcing a new program that will help taxpayers by improving the tax know-how and filing season readiness of paid tax return preparers. We intend to have this voluntary education program in place by the beginning of the 2015 filing season.
This is part of a broader effort the IRS began a few years ago to achieve a minimum level of competency across the federal tax return preparer community. Taxpayers need to be confident that the preparer they hire knows enough about taxes to help them with their federal income tax returns. That’s especially important now, because we have a very complex tax code, and the majority of taxpayers in this country use the help of a paid return preparer to do their taxes each year.
About 60 percent of paid tax return preparers in the U.S. operate without regulation or oversight. Although many of them do a good job, we have found that others are poorly equipped to assist taxpayers in preparing returns.
For that reason, the IRS had started a mandatory program of education and testing for unregulated tax return preparers who did not have professional credentials. But we had to suspend that program because the courts ruled that we didn’t have the legal authority to require education and testing. So we’re launching a voluntary program as a temporary substitute. It’s called the Annual Filing Season Program.
I say “temporary” because we have been urging Congress to enact a proposal in the President’s Fiscal Year 2015 Budget that would give us the authority for mandatory oversight of return preparers. This voluntary program is not the ideal solution. But until legislation is enacted, we still have a responsibility to taxpayers and to our tax system to keep moving forward with our efforts to improve service to taxpayers.
Let me give you an idea of what the program entails. A preparer who wanted to participate would have to be registered with the IRS and have a valid Preparer Tax Identification Number, or PTIN. Under the program, preparers who sign up agree to take 18 hours of continuing education each year. That includes 10 hours on federal tax law topics, two hours on ethics, and a six-hour tax filing season refresher course. The refresher course includes a comprehension test of 100 questions.
If you complete the course work and pass the test, you would receive a record of completion that would be good for the filing season. You would also have a limited right to represent your clients before the IRS on issues pertaining to the returns you prepared for them. To keep your qualification and practice rights current, you would have to take the courses and pass the test each year.
We think this program is important for a number of reasons. It encourages unregulated return preparers who don’t have to meet continuing professional education requirements to stay up to date on tax laws and changes. It helps lessen the risk to taxpayers from preparers who have no education in federal tax law or filing requirements. And it allows preparers without professional credentials to stand out from the competition by giving them a recognizable record of completion that they can show to their clients.
Another way we’re helping taxpayers is by developing a database of qualified tax return preparers that will be available on our website, IRS.gov, by January 2015. This database will include the unregulated preparers who choose to participate in our voluntary education program. The database will also have practitioners who already have higher levels of qualification and practice rights, and who don’t need our program. These include attorneys, Certified Public Accountants, enrolled agents, enrolled retirement plan agents and enrolled actuaries who are registered with the IRS.
I want to emphasize that this new program is not designed to undercut the fine work being done by these credentialed professionals that I just mentioned. They all have to meet very stringent standards of competency and professional conduct, and they provide an important service to taxpayers. But they only represent about 40 percent of the universe of paid tax return preparers. So it’s important for the IRS to do everything we can to make sure that the other 60 percent stay up to date on tax law changes and operate in a professional manner.
We want to get the word out to taxpayers about this program and how it can help them at tax time next year. So as part of our efforts, we will be rolling out a public awareness campaign for the 2015 tax season to help educate everyone about the value that competent, qualified return preparers provide. This will include highlighting the importance of either being a credentialed preparer like a CPA, enrolled agent or attorney, or participating in our program.
Again, let me say that the Annual Filing Season Program is an interim step, not the ultimate solution. But until the IRS has the authority to require continuing education and testing of unregulated preparers, we feel this voluntary program is the best approach for us to take in the upcoming filing season to protect the taxpaying public.
With that, I’ll be happy to take your questions.