IRS Seeks to Prevent Future Errors on Tax Returns by Focusing on Return Preparers

Dec 21, 2010   

The Internal Revenue Service (IRS) continues to emphasize its focus on tax return preparers by sending more than 10,000 letters to tax return preparers nationwide. Additionally, the IRS plans on visiting 2,500 of these return preparers “to discuss their responsibilities as a return preparer and to verify their compliance with existing requirements.” Notably, the targets of these letters and visits are “paid preparers who completed tax returns in which the IRS has identified common errors.” IRS Continues Efforts to Ensure Accurate Return Preparation; Reminds Tax Preparers to sign up for PTINs, IR-2010-118 (December 2, 2010).

These efforts go along with IRS goals announced by Commissioner Douglas H. Shulman of “a sound, fair and efficient tax administration” and “improved compliance.” The IRS adopted the “Return Preparer Initiative” earlier this year, which Commissioner Shulman described as part of “an evolutionary change of getting smarter and working smarter.” Commissioner of Internal Revenue Douglas H. Shulman’s Keynote Speech Before the AICPA Fall Tax Meeting. IR-2010-107, (Oct. 26, 2010)

The IRS continues to remind return preparers to obtain a Preparer Tax Identification Number (PTIN) by completing an online application and paying the $64.25 fee to pay or renew a PTIN. According to Commissioner Shulman, the IRS plans to use these applications to build a publicly accessible database that consumers can use to ensure their return preparers are qualified. Id.

Additionally, effective January 1, 2011, the IRS is imposing requirements on paid tax return preparers who meet the definition of “specified tax return preparer” under the new law to electronically file (“e-file”) federal income tax returns that they prepare and file for individuals, trusts, and estates. The e-file requirement will be “phased in” over a two year period. On January 1, 2011, the designation as a “specified tax return preparer” constitutes a paid preparer who reasonably expect to file 100 or more income tax returns in 2011. On January 1, 2012, the designation will be broadened to include paid preparers who reasonably expect to file 11 or more income tax returns in 2012. Starting in 2011, Many Paid Preparers Must e-File Federal Income Tax Returns for Individuals, Estates and Trusts. IR-2010-116. (December 1, 2010)

To comply with this requirement, specified tax return prepares must become authorized IRS e-file providers by obtaining electronic filing identification numbers (EFIN). The IRS has indicated this process can take up to 45 days. Id.

Please note that the IRS has recently released Form 8944, Preparer E-File Hardship Waiver Request, which permits “specific tax return preparers” as described above, to be excused from the e-file requirements for “undue hardship.” In Rev. Proc. 2010-85, §5.02, the IRS has indicated that it will grant this waiver “only in rare cases.” Undue hardship waivers will be approved or denied based on each specific tax return preparers particular facts and circumstances. Rev. Proc. 2010-85, §5.04. The IRS has specifically provided that not having a computer or appropriate software does not, standing alone, constitute undue hardship. Rev. Proc. 2010-85, §5.05.

If you have any questions regarding the Tax Return Preparer Initiative, PTINs, EFINs, or any other tax provision, please contact Fuerst Ittleman, PL at