A classmate of yours, Frank Lynn, is finishing his BS-Business degree at Frankli

Question

A classmate of yours, Frank Lynn, is finishing his BS-Business degree at Franklin University. Frank works full-time in the accounting department of a construction company. He’s married with two young kids. Despite his busy schedule, he’s thinking of doing income tax preparation beginning next month. Frank has taken several tax courses at Franklin and feels he has enough knowledge to get started. He’s planning to contact family members and friends and let them know he’s available to do their taxes. Because he’s so busy at year-end right now at his full-time job, he’s asked for your help in doing research regarding any limitations or restrictions on income tax preparers who are not CPAs or attorneys. Frank wants to make sure he’s in full compliance both legally and ethically. He also wants to know if there is any possible legislation on the horizon, which might impact tax return preparers. He has done some preliminary research and found these resources, which might be relevant. Frank asks for your assistance analyzing them, and doing follow-up research to other relevant resources.

IRS Office of Professional Responsibility

Circular 230

Loving vs. IRS 2014

Court of Appeals case House of Representatives Bill 4141

Explanation / Answer

Frank should not start working as a tax preparer till he gets PTIN(preparer tax identification number) from irs.

Detailed explanation-

Internal revenue Service is the authority for tax collection and tax law enforcement. They have issued circular 230 which contains the duties and regulations and gives the detailed explanation of duties and obligations of tax preparer when practicing for irs.

As per irs, any tax proffessional with PTIN (preparer tax identification number) is authorized to prepare federal returns. The cpa holders and certain other categories (lawyers, EA s etc ) are allowed to be tax prepares with unlimited representation rights. All other prepares have limited rights.

Earlier, the preparers other than CPA, EAs etc have to register with irs and take a test by paying them fee. As per the circular 230, to obtain the designation as a registered tax return preparer, the person should be more than 18 years old, should demonstrate competence in written exam conducted by irs, should possess valid preparer tax identification number. This was effective from 2011 august.

But later, in loving vs irs 2014 case, three independent tax practitioners contested that IRS has no grounds to regulate independent tax practitioners. IRS defended that the authority to regulate tax preparers comes under irs because of 'enabling act of 1884'. But irs lost the case and lost their strict control over tax practitioners. Still, they conduct a voluntary examination to sanction for tax preparers. to get listed in tax preparer directory, taking of examination is required if you are not a CPA, EA or lawyer.

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