Tax law is complicated and interpreting those laws and filing tax returns accurately takes knowledge, ability, and experience. So you might be surprised to learn that just about anyone can charge others to file their tax returns.
That's right. Most states require a license to give someone a haircut but don't require any education, experience, competency screening, or background check for tax preparers.
The IRS attempted to change this by creating the Preparer Tax Identification Number (PTIN) program, with mixed results. This article explains what a PTIN is, who needs one, and why it matters.
What Is A PTIN Number?
A PTIN is an identification number the IRS issued to paid tax preparers.
When the PTIN program started in 2011, the IRS required all paid tax preparers to register online and pay a fee to get a PTIN, then include their PTIN on any returns they prepared or signed. The agency also launched the Registered Tax Return Preparer (RTRP) program. This program required any paid tax preparers who didn't have another credential—such as Certified Public Accountants (CPAs), Enrolled Agents (EAs), and attorneys—to pass a basic competency test and earn 15 hours of continuing education (CE) each year.
Not everyone agreed that the IRS had the authority to mandate these requirements. A handful of independent tax preparers filed a lawsuit accusing the IRS of overstepping its authority. A US District Court Judge and the DC District Court of Appeals agreed, and the RTRP program was discontinued in 2013.
While the IRS no longer requires paid tax preparers to pass an exam or earn CE hours, it still requires anyone who prepares or helps prepare federal tax returns for compensation to have a valid PTIN.
Does Your Tax Preparer Have a PTIN?
The IRS maintains a directory of PTIN holders. However, it doesn't include everyone who has a valid PTIN. It only includes PTIN holders who meet one of the following requirements:
- Hold professional credentials recognized by the IRS, such as attorneys, CPAs, and EAs
- Completed the IRS's Annual Filing Season Program, which is a series of voluntary CE classes covering federal tax law and ethics
If your tax preparer isn't in the directory, it doesn't necessarily mean they don't have a PTIN. It just means either they don't hold one of the credentials recognized by the IRS or haven't completed the Annual Filing Season Program.
You can always ask your preparer if they have a PTIN. Or you can look at the Paid Preparer Use Only section of your Form 1040, U.S. Individual Income Tax Return; Form 1065, U.S. Return of Partnership Income; Form 1120-S, U.S. Income Tax Return for an S Corporation; or Form 1120, U.S. Corporation Income Tax Return. If your preparer has a PTIN, they should include it in the PTIN box to the right of their name and signature.
Just keep in mind that anyone can apply for a PTIN online. They just need to create an account at IRS.gov, fill out a basic application, and pay a $35.95 user fee. So having a PTIN alone isn't an indication of the person's skills or experience, but it does show they've at least complied with the minimum requirements to charge for their services.