Thursday, September 15, 2011

IRS Heads-Up on the Taxpayer Identification Test

A recent IRS announcement clarified that 78 topics in seven major areas: collecting taxpayer data, treatment of income and assets, deductions and credits, other taxes, completing the filing process, practices and procedures and finally ethics; would be tested on the new competency exams to establish Registered Paid Tax Preparers. In addition to passing the test, prospective Registered Tax Preparers (RTP) would have to pass a background check and obtain 15 hours of continuing education per year (vs. 16 hours under Treasury Circular 230). RTPs have until December 2013 to take the this exam if they have Provisional Preparer Identification Numbers (PPIN), but may take the exam as soon as it is made available. It appears that the Competency Exam will be available this fall and will run about 2-3 hours in length. EAs, CPAs and attorneys are exempted from the competency exam, at least for now. The Competency Exam, like the CPA exam and numerous other professional exams, will be given via Prometric. A fee of between $100 and $150 will likely be charged to take the exam; this is in addition to the annual $64.50 to be paid to the IRS. Candidates will have IRS Publication 17, Form 1040 and Form 1040 instructions available to them during the exam.

It is good to see some preliminary information about the Competency Exam. The facts that individual tax is the only area of taxation covered, that the exam is RELATIVELY short (less than half a day vs. two days for the CPA exam) and that materials will be able to students taking the exam suggests to me (perhaps overly cynically) that the test is designed more to raise revenue than to regulate entry to tax preparation. That said, I am sure that some tax preparers WILL be weeded out by the test, especially between now and December 2013.


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