Tuesday, May 17, 2016
THE STORY OF "PTIN"
Only those individuals who register with the Internal Revenue Service and receive a PTIN are permitted by law to prepare tax returns for compensation.
What is a PTIN? Here’s the story -
For as long as I have been preparing 1040s, since February of 1972, paid preparers have been required to sign the tax returns they prepare.
On the 1971 return the preparer signature attested that: “Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief it is true, correct, and complete.”
The sentence, “Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge,” was added to this statement sometime thereafter.
The 1977 return was the first that required, in addition to a signature, the preparer’s “identifying number”, later specifically referred to as the preparer’s Social Security number. Beginning with the 1978 Form 1040, the preparer’s “Firm’s name (or yours if self-employed), address and ZIP code” and its corresponding Employer Identification Number had to also be entered on the return under a section called “Paid Preparer’s Information.”
In an attempt to avoid identity theft, a “Preparer Tax Identification Number”, or PTIN, was created as an alternative to listing one’s Social Security number on the return. The 1999 Form 1040 was the first that asked for the preparer’s “SSN or PTIN”, and the first return on which I entered my PTIN, which is the same PTIN I use today.
Up through the 2009 return a PTIN was optional, and paid preparers could still use their Social Security number when signing a return. And up through 2009 there was no fee for applying for a PTIN, and one never had to renew one’s PTIN.
Beginning with the 2010 return all paid preparers were required to register with the IRS and obtain a PTIN as part of the new IRS mandatory Registered Tax Return Preparer regulation regime.
As a part of the IRS regulation regime, tax preparers were required to pay an initial $64.25 to receive, or “refresh” an existing, PTIN. PTINs were required to be renewed annually at a cost of $63.00. The PTIN fee was established as a method of partially funding the mandatory RTRP program, and annual renewal was initiated so that the preparer could verify that they had taken the required hours of continuing professional education. The IRS mandatory RTRP regulation regime was put to death by the court in Loving v. IRS.
The PTIN renewal fee for both new and renewing applicants was reduced to $50.00 in late 2015. This is still an excessive and unnecessary fee. The $50.00 is composed of an actual $33.00 IRS fee and $17.00 for the outsourced agency that maintains the PTIN registry. The $17.00 per person fee to an outside agency is truly excessive and unnecessary.
The IRS truly needs to maintain a registry of tax return preparers, via the issuance of a PTIN, and the judge in Loving v. IRS allowed the IRS to continue to require that all paid preparers register with the service and receive a PTIN. But with the death of the mandatory RTRP program there is no longer a need to charge such a substantial fee, or any fee, for acquiring or maintaining a PTIN. And, as there are no longer any requirements for being able to prepare tax returns for compensation, there is no reason for annual renewal. A preparer’s PTIN could be renewed every three years, at no charge, so the IRS could remove preparers who no longer prepare from the system.
The message to taxpayers – never use a person to prepare or amend your tax return for a fee who does not have a PTIN, or who will not sign the finished return and enter his or her PTIN.