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Beware New IRS Rules for Paid Tax Preparers

By Andrew Chow, Esq. on January 31, 2011 6:05 AM

Paid tax preparers beware. You may think you're ready to start working on your clients' 2012 tax returns -- but are you ready for the new IRS rules?

New IRS rules for paid tax preparers take effect Jan. 1. They include education requirements, background checks, and competency exams, depending on what kind of tax preparer you are.

The biggest change affects all paid tax preparers, including attorneys and certified accountants. Anyone who is paid to prepare a tax return must now apply for a Preparer Tax Identification Number, or PTIN.

But there's a catch.

The online PTIN application system is currently down for more than two weeks of maintenance, the Journal of Accountancy reports. The site is scheduled to be back up by 6 a.m. Eastern Time on Jan. 9.

Other notable new IRS rules include:

  • Continuing education is now required for all nonexempt tax preparers -- those who are not attorneys, certified public accountants, or enrolled agents. The new IRS rules require 15 hours of continuing education each year.
  • A competency exam and background check are now required for all nonexempt tax preparers. But the IRS is giving nonexempt preparers until 2013 to complete these requirements.
  • A "due diligence checklist," Form 8867, must be filed by paid tax preparers for each client who claims the Earned Income Tax Credit.

The new IRS rules aim to protect consumers from "the inept and the unscrupulous," a board member with the California Tax Education Council told BusinessWire.

California and Oregon are currently the only states that require tax preparers to meet testing and education standards. The new IRS rules largely mirror California's rules, which have been in effect for more than a decade.

You can learn more about the new IRS rules for tax preparers online at

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