In this article you will find the answer to the question "Who must pass the IRS competency examination in order to continue working as an income tax return preparation practitioner"?
Regulations distinguish among three categories of tax return preparers:
1. Attorneys, CPAs, and enrolled agents
2. Non-Form 1040 preparers and supervised preparers.
3. Candidate to become Registered Tax Return Preparer.
Attorneys, CPAs, and enrolled agents, non- Form 1040 preparers and supervised preparers are not required to meet the test requirement in order to perform their tax related activities. However, any individual not included in the above categories, who prepares a federal tax return for a fee, and pretends to become a Registered Tax Return Preparer under the new regulations, must pass the IRS competency examination.
The reason why Attorneys, Certified Public Accountants and Enrolled Agents (EAs) are exempt from testing and continuing education requirement is because they have a toughest professional testing and education requirements covering the tax laws and regulations.
The test exemption is extended to the supervised employees of attorneys, CPAs, attorneys or Enrolled Agents (EA) who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare.
The testing is mandatory just for certain individuals who prepare tax returns on the Form 1040 series. So, individuals who prepare federal returns other than those in the Form 1040 series are also exempt from the test requirements.
To be more precise and clear about who is who, let's review the definition of each categories of tax return preparer as shown in the regulation:
A law firm is a law partnership, Professional Corporation, a sole proprietorship, or any other association authorized to practice law in any state, territory, or possession of the United States, including a Commonwealth, or the District of Columbia.
A certified public accounting firm is a partnership, professional corporation, sole proprietorship, or any other association that is registered, permitted, or licensed to practice as a certified public accounting firm in any state, territory, or possession of the United States, including a Commonwealth, or the District of Columbia
An enrolled agent is a tax professional, who has demonstrated special competence in tax matters, applied for enrollment, and has been issued an enrollment card
An individual who is supervised by an attorney, CPA or an enrolled agent, and the supervised preparer is employed by a law firm, CPA firm or other recognized firm (a firm that is at least 80 percent owned by attorneys, CPAs, or enrolled agents).The supervised preparers may not sign any tax returns they prepare or execute any other functions registered tax return preparers are allowed to execute.
Non-Form 1040 series preparers are individuals who do not prepare, or assist in the preparation of, any Form 1040 series tax return or claim for refund, except a Form 1040-PR or Form 1040-SS, for a fee.
A very important distinction is that a supervised preparer working for a Registered Tax Return Preparer who is not a lawyer, a CPA or an enrolled agent (under Circular 230) must have a PTIN and pass the competency examination. The exception for supervised preparers only applies if the individual is supervised by an attorney, CPA or an enrolled agent, and the supervised preparer is employed by a law firm, CPA firm or other recognized firm (a firm that is at least 80 percent owned by attorneys, CPAs, or enrolled agents).
The IRS has published more details about the competency examination, including the major topics that will be covered in the test. It is time to become informed and take action if you intend to become a registered tax return preparer. The IRS test will be available in mid-Fall-2011. Inasmuch as the test content outline published by the IRS covers an extensive amount of materials, candidates should take time to plan the use of available resources to be able to review the tax concepts in order to be successful in the testing room.
Read the next article of this series,"What is the IRS Exam Content ".
Don't delay to be proactive toward becoming informed about the IRS exam. Visit our website and know more about 1040 Exam Prep study materials.
Have access to free tools designed to assist you in your exam preparation at http://1040examprep.com/
Norma Wahnon
Tax Return Preparer, CPN
TaxBiz Solution
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