State Board Report

April 2010

Proposed regulations for the Internal Revenue Service’s new registration program of tax return preparers (amending Section 6109 of the IRS Code) were detailed at the Executive Directors Conference by Karen Hawkins, director of the IRS Office of Professional Responsibility (OPR). She said the IRS would be releasing proposed regulations on March 25 that define “tax return preparer.” The regulations would exclude those providing incidental services but would not make a distinction between form signers and non‐signers as to who will need to obtain a Preparer Tax Identification Number (PTIN). However, Ms. Hawkins pointed out, a slight distinction would be made to avoid registering those only giving tax advice.

“Our goal is to have a database in three years,” Ms. Hawkins stated and explained the IRS is now determining what information should be put in it. It will definitely include information on those who have been disciplined by the OPR, she assured the executive directors. All tax preparers will be encouraged to apply for new PTIN in September 2010, as any identification number issued by the IRS prior to the effective date of the new regulation will expire on December 31, 2010.

“The decision has been made to get everyone into the system quickly and efficiently,” Ms. Hawkins said. “After handing out the PTINs we will ask if you are currently compliant with all your federal tax liabilities and have you been convicted of a felony.” There will be competency testing for preparers who are not active and in good standing as a CPA, attorney or enrolled agent (EA). The competency test has not yet been devised, but the IRS will be putting out a request for proposal in the next few weeks. Ms. Hawkins reported the IRS will do the drafting and selection of questions, as it does currently for the EA examination.

William Treacy, executive director of the Texas Board, asked Ms. Hawkins if there would be a liaison established between the State Boards and OPR. Ms. Hawkins replied, “Having sat in with the AICPA and State Boards, I have told the Commissioner he is shortchanging himself in not hearing more from the State Boards.” Mr. Treacy then underscored the Boards’ need to know if someone is disciplined by the OPR. “My people are sending that information out to the Boards on a regular basis,” Ms. Hawkins responded.

The OPR checks all of the states’ databases when something comes to them involving a CPA. Ms. Hawkins commented, “We share our database with most of your states’ Accountancy Boards and the bar. The thought of your creating a database [ALD] is very attractive to us if you share it with us and we could share it with others.”

There will be a continuing professional education requirement for preparers, but not for attorneys, CPAs or EAs. However, she said, the IRS will be looking that over.

Considering the new IRS program, Larry Gray, former president of the Missouri State Board of Accountancy and a member of the IRS Commissioner’s Advisory Group, recently commented: “I believe it is important, both at the NASBA and the state board level, that we revisit our CPE standards to see if there needs to be modifications or any bars raised because we want the State Boards, from the compliance side, to be the model and for the NASBA CPE requirements to be the standard. Let’s not allow federal regulation to outdate us.”

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