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In the event an applicant for registered tax return preparer status is denied enrollment, (s)he may file an appeal of that decision with the Deputy Commissioner of the Internal Revenue Service.
An applicant who is denied enrollment may, within 30 days after receipt of the notice of denial, file a written appeal to the Secretary of the Treasury. A decision on the appeal will be rendered by the Secretary of Treasury as soon as practicable.
Mike, age 30, and his daughter lived with Mike’s mother during the year. Mike’s earned income and adjusted gross income for the year was $4,000. The mother’s adjusted gross income for the year was $37,000. Assuming that the daughter is a qualifying child for both Mike and his mother, which of the following statements is true with regard to the Earned Income Credit?
Since the daughter is a qualifying child for both Mike and his mother, they both can claim the credit providing they allocate the earned income.
Neither can claim the credit.
Mike can claim the credit since he is the parent, and his mother’s adjusted gross income exceeds the limit for the year.
Mike’s mother can claim the credit because her adjusted gross income is more than Mike’s.
The Earned Income Credit is a refundable tax credit for low-income taxpayers under Sec.
32. The credit is based on a taxpayer’s earned income subject to certain limitations. An individual is eligible for the Earned Income Credit if (s)he has a qualifying child for the tax year or does not have a qualifying child for the tax year and (1) has a principal place of abode in the United States for more than one-half of the tax year, (2) has attained age 25 but not age 65 before the close of the tax year, and (3) is not a dependent of another taxpayer for any tax year beginning in the same calendar year. A qualifying child is one who bears the necessary relationship to the taxpayer, has the same principal place of abode as the taxpayer for more than one-half of the tax year, and meets the requisite age
requirements, and one for whom the necessary identification requirements are satisfied. If more than one person has the same qualifying child, then the parent is given priority to claim the credit.
Which of the following is false?
A taxpayer who is a qualified child of another person cannot claim the EIC.
You cannot claim the Earned Income Credit if you do not have a SSN.
You can claim the Earned Income Credit with an ITIN.
You are not allowed the Earned Income Credit if you are married filing separately.
Individual Tax Identification Numbers (ITINs) disqualify the taxpayer and/or the otherwise qualifying child (QC) from the credit.
A taxpayer should itemize deductions if the taxpayer’s total itemized deductions are
Less than the taxpayer’s interest income.
More than the taxpayer’s standard deduction.
Equal to the taxpayer’s self-employment tax.
Double the taxpayer’s unemployment compensation.
A person itemizes deductions if the total allowable itemized deductions, after all limits have been applied, is greater than the standard deduction. A person must elect to itemize, or no itemized deductions will be allowed.
Where is unreported tip income reported as income?
Line 7 of Form 1040.
Unreported tip income as calculated on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, line 4, will also increase Form 1040 line 7.
Which of the following statements is false regarding registered tax return preparers?
Practice is limited to preparing and signing tax returns and claims for refund and other documents for submission to the Internal Revenue Service.
They may represent taxpayers before revenue agents, customer service representatives, or similar officers and employees of the Internal Revenue Service during an examination if the registered tax return preparer signed the tax return.
They are subject to the provisions of Circular 230 in the same manner as attorneys, certified public accountants, enrolled agents, enrolled retirement plan agents, and enrolled actuaries.
They may represent taxpayers before appeals officers, revenue officers, counsel, or similar officers or employees of the Internal Revenue Service or the Treasury Department.
A registered tax return preparer may not represent taxpayers before appeals officers, revenue officers, counsel, or similar officers or employees of the Internal Revenue Service or the Treasury Department.
If the IRS rejects the electronic portion of a taxpayer’s individual income tax return for processing, and the ERO cannot rectify the reason for the rejection, the ERO must take reasonable steps to inform the taxpayer of the rejection within 48 hours.
If the IRS rejects the electronic portion of a taxpayer’s return and the reason for the rejection cannot be rectified by the actions described in Revenue Procedure 98-50, the ERO must take reasonable steps to inform the taxpayer that the taxpayer’s return has not been filed within 24 hours of receiving the rejection.
IRS RTRP Exam (Registered Tax Return Preparer Practice) Detailed Information
Registered Tax Return Preparer (RTRP) Test Fee Refunds – Frequently Asked Questions
1. Why is the IRS refunding RTRP test fees?
The United States Court of Appeals for the District of Columbia Circuit upheld the decision of the District Court in Loving v. IRS, that the IRS lacked authority to mandate competency testing for paid tax return preparers. As a result, the IRS is refunding the test fees to people who took the Registered Tax Return Preparer test.
2. I paid the fee and took the RTRP test. Do I need to take any action to claim my refund?
No action is necessary. Letter 5475, RTRP Refund Notification Letter, will be mailed approximately May 28, 2015, to people due an RTRP test refund. Refund checks will be mailed separately approximately June 2, 2015.
3. I received a Letter 5475, RTRP Refund Notification Letter, and I have not received a refund check yet. When will I receive it?
Refund checks will be mailed separately on June 2, 2015. Please allow until August 2, 2015 to receive your refund.
If after August 2, 2015, you still have not received your refund, please call the IRS number on your Letter 5475.
4. What address is the IRS using to mail checks?
Letters and checks are being mailed to the return preparer’s address in the Preparer Tax Identification Number (PTIN) system.
5. What if I took the test more than one time? Will I receive multiple refunds?
If you took the test more than once, you will receive one refund for the total test fees paid ($116 per test attempt). You will not receive a refund for any fees that were previously refunded by Prometric.
6. What about other expenses, such as continuing education, gas/travel, and hotel bills? Can I be reimbursed for those costs as well?
No, only the $116 test processing fees will be refunded.
7. Is this refund taxable to me?
Whether this amount is income depends upon a number of factors, including whether the amount was deducted previously as a business expense. See Publication 334, Chapter 5 under “Other Income-Recovery of Items Previously Deducted” for more information.
8. Can I keep my RTRP Certificate?
Yes. However the RTRP Certificate is no longer valid and serves no purpose when dealing with the IRS.
Beginning January 1, 2016, in order to have limited representation rights for clients, you will need to participate in the Annual Filing Season Program.
Anyone who passed the RTRP test only needs to meet their original 15 hour continuing education requirement each year to obtain an Annual Filing Season Program – Record of Completion.
9. I paid the RTRP test fee for employees of my tax business. Who will receive the test fee refund?
Refunds must be issued to the person who took the test. Third parties who paid test fees will need to resolve any reimbursement issues directly with the person who took the test.
10. What is the number in the memo section on the front of the check?
The number listed on the face of the check in the memo section is a file number that is used for identifying the refund check; this number can be 2-7 digits and helps us in researching questions that refund candidates have about their check.
11. Does the IRS plan to implement another competency test program in the future?
The IRS remains committed to the principle that all persons who prepare federal tax returns for compensation should be required to pass a test of minimal competency and take annual continuing education training. Taxpayers deserve top-quality and ethical service from all tax professionals. As part of this commitment, the IRS launched an interim Annual Filing Season Program in 2014 to promote voluntary continuing education by non-credentialed tax return preparers.
The President’s 2016 budget proposal would provide the IRS with authority to regulate all paid tax return preparers. Oversight of all paid preparers, coupled with diligent enforcement, would promote high-quality services from all tax professionals, improve voluntary compliance and foster confidence in the fairness of the U.S. tax system.
12. I did not receive a Letter 5475, but I believe I’m due an RTRP test fee refund.
If you scheduled the RTRP test and paid the test fee prior to January 18, 2013, and did not receive a Letter 5475, please contact the IRS at 913-722-7606 and leave a brief message indicating the reason for your call (i.e. you are eligible for an RTRP test fee refund but did not receive a letter 5475). The message should include the following:
Your full name
Current daytime phone number where you can be reached during normal business hours
Please allow 3-5 business days for a response from the IRS RTRP Testing contact phone center. This phone number is only for questions about RTRP test fee refunds. Calls about other issues will not be returned.
Registered Tax Return Preparer Test Explained
FS-2011-12, November 2011
The Internal Revenue Service currently is implementing an oversight program to increase the quality of the tax preparation industry and to improve services to taxpayers. This program requires all paid tax return preparers to register with the IRS each year and have a Preparer Tax Identification Number (PTIN).
Certain tax return preparers who prepare the Form 1040 series returns must take additional steps. These preparers must pass a one-time competency test, a tax compliance check, and a suitability check. Preparers who meet these requirements will be given a new designation: Registered Tax Return Preparer. Additionally, they must complete 15 hours of continuing education each year, starting in 2012.
Currently, PTINs are issued with either an active or provisional status. Active PTINs are given to Enrolled Agents, Certified Public Accountants and attorneys, among others, because these individuals are not required to take the competency test. Tax return preparers who must pass the competency test are given a provisional PTIN. These individuals have until Dec. 31, 2013, to pass the test.
RTRP Competency Test Overview
The fee for taking the Registered Tax Return Preparer competency test is $116. The test is a timed, 2½ hour exam that will cover the Tax Year 2010 Form 1040 series and its related tax schedules. There are 120 questions in a combination of multiple choice and true or false formats. Test takers cannot bring any resource materials but they will have access to the Form 1040, Form 1040 instructions, and Publication 17, Your Federal Income Tax.
The test is available in English only at this time and generally will be administered in a computer based testing format. The test must be taken at Prometric Inc., test centers. Prometric will eventually offer the test at more than 260 domestic centers nationwide, but it is not available at all locations currently. Those who initially do not locate a nearby test site should check back because additional test sites will be added daily.
There is no limit on the number of times the test can be taken, but preparers must pass the test only once. If an individual takes the test more than once, the $116 fee will apply each time the individual takes the test.
Initial test takers won’t receive their test scores for two to six weeks to allow the IRS to validate the exam and determine the pass/fail cutoff. Once validation is complete, around mid-January, those taking the computer-based test will receive their scores at the test center immediately upon completing the test.
Who Must Take the Registered Tax Return Preparer Test
A paid tax return preparer must take the Registered Tax Return Preparer competency test and meet the other requirements for becoming a Registered Tax Return Preparer unless the tax return preparer is a:
Certified Public Accountant, attorney, or an Enrolled Agent;
Supervised preparer, which is an individual who:
Does not, and is not required to, sign a tax return as paid preparer,
Works at a firm at least 80 percent owned by CPAs, attorneys or Enrolled Agents, and
Is supervised by a CPA, attorney or Enrolled Agent
Preparer who does not, for compensation, prepare, or assist in the preparation of, all or substantially all of any Form 1040 series return. For purposes of this exemption, Forms 1040-PR and 1040-SS are not Form 1040 series returns.
Paid tax return preparers will be notified by the IRS of their test requirement either in their welcome letter if they are obtaining a new PTIN or in their “next steps” notification when they renew their PTINs.
Preparing for the Test
The IRS has released test specifications which outline the general individual income tax topics that will be covered by the exam. The IRS also has released a list of publications and instructions from which the test topics were taken. The test specifications and publications, as well as a tutorial, a video on what to expect test day, and a Candidate Information Bulletin, are available at www.irs.gov/taxpros/tests.
Because the test will cover 2010 tax issues, the IRS encourages preparers to download the publications and save them to their computers so they can be sure they have the correct tax year as a study guide.
What Certifications Does a Tax Return Preparer Need?
The Internal Revenue Service issues preparer tax identification numbers (PTINs) to anyone authorized to legally prepare — and defend — tax documents for individuals and companies. But there are credentials beyond the PTIN providing tax return preparers additional representation rights. For individuals interested in becoming a tax preparer, understanding the tax preparation requirements will help them achieve the career they're interested in pursuing. The certifications include:
An enrolled agent is a registered tax return preparer required to pass a suitability check, take an extensive test covering individual and business taxes as well as representation issues, and undergo 72 hours of additional education every three years. They have the most extensive licensing provided by the IRS, valid across the entire country.
Certified Public Accountants
CPAs are licensed by states or U.S. territories, and must pass the Uniform CPA Examination. Each state or territory establishes additional tax preparation requirements like education and review of certification requirements as well. Many CPAs will specialize in tax planning or preparation of returns.
Attorneys must be licensed by a state court or state bar after having earned a law degree and passed the bar exam. Not only are attorneys a registered tax return preparer, they also can prepare a legal defense for a client involved in a tax-related court case, even for taxes they did not prepare.
The IRS had a program providing Registered Tax Return Preparer certification to certain preparers. However, this program is no longer enforced due to a February 2014 decision by the U.S. Court of Appeals for the District of Columbia Circuit Court finding that the IRS has "insufficient statutory support for the IRS' regulation of federal tax return preparers." Read More.
Registered Tax Return Preparers
The IRS had a program providing Registered Tax Return Preparer certification to certain preparers. However, this program is no longer enforced due to a February 2014 decision by the U.S. Court of Appeals for the District of Columbia Circuit Court finding that the IRS has "insufficient statutory support for the IRS' regulation of federal tax return preparers."
Once certified, tax return preparers often invest in cloud-based software programs like Intuit Tax Online or Intuit ProConnect Lacerte Tax that help provide their clients with better accuracy and quicker service. Both programs are excellent for tax preparers of any certification level.
IRS Releases Specifications for Registered Tax Return Preparer Test
IR-2011-89, Sept. 6, 2011
WASHINGTON — The Internal Revenue Service today released the specifications for the competency test individuals must pass to become a Registered Tax Return Preparer.
The test is part of an ongoing effort by the IRS to enhance oversight of the tax preparation industry. Preparers who pass this test, a background check and tax compliance check as well as complete 15 hours of continuing education annually will have a new designation: Registered Tax Return Preparer.
The specifications identify the major topics that will be covered by the test, which will be available starting this fall. Although individuals who already have a provisional preparer tax identification number (PTIN) from the IRS do not have to pass the exam until Dec. 31, 2013, they may take the exam at any time once it is available.
The test will have approximately 120 questions in a combination of multiple choice and true or false format. Questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.
Test vendor Prometric . worked with the IRS and the tax preparer community to develop the test. The time limit for the test is expected to be between two and three hours. The test must be taken at one of the roughly 260 Prometric facilities nationwide.
To assist in test preparation, the following is a list of recommended study materials. This list is not all-encompassing, but a highlight of what the test candidates will need to know.
Some reference materials will be available to individuals when they are taking the test. Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.
The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times preparers can take the test, but they must pay the fee each time. Individuals must pass the test only once.
Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, Certified Public Accountants and Enrolled Agents (EAs) are exempt from testing and continuing education because of their more stringent professional testing and education requirements. Also exempt are supervised employees of attorneys, Cs, attorneys or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare and individuals who prepare federal returns other than the Form 1040 series.
Approximately 730,000 return preparers have registered and received PTINs in 2011. Approximately 62 percent do not have professional credentials. The IRS does not yet know how many preparers will fall into other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.
The IRS will notify those preparers who have a testing requirement and provide more details. Once the test is available, preparers who have on-line accounts can use their accounts to schedule a test time and select a Prometric site.
At the time the current version of Publication 17 went to press, there were certain tax benefits that had not been finalized and several tax benefits were subsequently extended. See Legislative Changes Affecting the 2010 Publication 17 on IRS.gov for the details needed for study purposes.
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Page Last Reviewed or Updated: 22-Jan-2015
IRS Announces New Tax Preparer Program To Mixed Reactions
Post-Loving, Olson has pushed Congress to pass legislation to authorize the IRS to reinstate the ">RTRP program. In the interim, she had recommended that the IRS adopt a voluntary program similar to the ">RTRP program. Olson greeted the announcement of the new ...
IRS to Refund ">RTRP Test Fees
The IRS is refunding test fees to those who took the Registered Tax Return Preparer test.
The agency plans to mail “">RTRP Refund Notification” letters to people who are due a refund before the end of May. Refund checks will be mailed separately, starting approximately June 2, 2015.
The IRS cited the recent federal Appeals Court decision regarding Loving v. IRS that held that the service “lacked authority to mandate competency testing for paid tax return preparers” as reason for the refunds.
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Only the $116 test processing fees will be refunded. Preparers who took the test more than once will receive one refund for the total test fees paid ($116 per test attempt).
“Please allow until [Aug. 2] to receive your refund,” the IRS says on its Web page concerning the refund.
Letters and checks are being mailed to preparers’ addresses in the Preparer Tax Identification Number system. Refunds must be issued to the person who took the test.
The IRS started a new voluntary tax preparer continuing education program, the Annual Filing Season Program, in the wake of Loving. The program met mixed reviews but so far has issued almost 44,000 records of completion to preparers.
“The IRS remains committed to the principle that all persons who prepare federal tax returns for compensation should be required to pass a test of minimal competency and take annual continuing education training,” the agency reiterates on its refund page.
The ">RTRP Certificate is no longer valid and "serves no purpose when dealing with the IRS," the service said. Beginning Jan. 1, 2016, in order to have limited representation rights for clients, preparers need to participate in the new Annual Filing Season Program.
Those who passed the ">RTRP test only need to meet the original 15-hour continuing education requirement to obtain a Record of Completion from the AFSP.
Test-takers who haven’t received a due refund after Aug. 2 are asked to call the IRS at (913) 722-7606, Monday through Friday, 8 a.m. to 5 p.m. Central Time.
“When leaving a message, please include your first and last name, PTIN, reason for calling, and a daytime phone number where you can be reached during normal business hours,” the IRS says on its refund page. “We will respond to you within three to five business days.”
IRS Issues First Registered Tax Return Preparer Certificates
The Internal Revenue Service has begun issuing test results to tax return preparers who have taken the new return preparer competency test. Anyone who passes the 120-question test and the tax compliance check will be given the new designation, Registered Tax Return Preparer.
The new test became available in November 2011 and it has just finished the calibration phase. During this phase the IRS validated the questions and set the passing score. A passing score is 350 or higher out of a perfect score of 500.
Anyone that has taken the test received a letter from the IRS stating whether they passed or failed. Individuals who pass the test must pass a tax compliance check performed by the IRS. The check is generally completed a few weeks after the test score is issued. Those who pass both the test and the tax compliance check will receive a Registered Tax Return Preparer certificate. Only those tax return preparers who received the certificate can call themselves Registered Tax Return Preparers.
The test was created as part of the IRS’ efforts to guarantee professional standards within the tax preparation profession. All paid tax preparers are required to obtain a Preparer Tax Identification Number and renew it each year. In addition, certain return preparers must complete 15 hours of continuing education annually, pass the competency test by December 31, 2013 and pass the tax compliance check.
Cs, attorneys and Enrolled Agents are exempt from the new requirements as they have separate requirements. The new requirements will not apply to non-signing preparers supervised by Cs and those who do not prepare the Form 1040 series as well.
Many resources are available for preparers, including a list of recommended study materials, a test demonstration and a video of what to expect on test day. In addition, preparers with a testing requirement can schedule the test using their PTIN account. Preparers can take the test at more than 260 test sites and the test fee is $116.
Testing will be suspended beginning April 1 and resume on April 16. Starting April 16, test takers will receive their test resulting at the test center immediately following completion of the test.
A VOLUNTARY ">RTRP DESIGNATION!
Fellow tax blogger and (not fellow) Enrolled Agent Jason Dinesen has replied to my earlier request for his opinion on the issue of a voluntary ">RTRP designation, which has been made a current topic as a result of the recent comments by new IRS Commissioner John Koskinen (click here for the ACCOUNTING TODAY article), in “A Voluntary ">RTRP Designation?” at the DINESEN TAX TIMES.
Jason opposes the idea, whether it is administered by the IRS or a “private overseer”.
He makes the following comments within the post –
“What purpose would it serve? It would be a useless designation no matter who oversees it.
If administered by the IRS, it would harm Enrolled Agents.
If you can prepare tax returns without being an ">RTRP, and if the ">RTRP designation doesn’t allow a person to represent clients, what exactly would people who achieve a voluntary ">RTRP designation do with it????? What’s the point?????”
Under the current system any Tom, Dick, or Harriet can hang out a shingle as a “tax preparer”. It has been this way for 100 years. There are many educated, competent, and current “unenrolled” Toms, Dicks, and Harriets. I am one of them. I never wanted to represent non-client taxpayers before the IRS, so I never became an Enrolled Agent. I can represent my own 1040 clients at an IRS audit as preparer without an EA credential.
But what about the person who simply buys a tax preparation software program and holds himselfherself out to the public as a “tax preparer” with no training or experience in tax preparation? Or the guy or gal who has been preparing hisher own return and those of family and friends for years and now wants to make some extra part-time money at tax time by taking on “strangers”? Or, worst of all, the person who adds tax preparation to his business solely so that heshe can sell “Refund Anticipation Loans” and profit from usurious interest rates and processing fees?
As a knowledgeable, experienced, competent, ethical, and current “unenrolled” preparer I, like Rodney Dangerfield, “get no respect”. The point of a recognized designation is to set me, and those like me, apart from the “casual”, unethical, or uneducated preparer, and recognize my knowledge, experience, competence, and currency in preparing 1040s.
And the point is to provide the taxpayer public with a way to identify that a person claiming to be a “tax professional” is truly knowledgeable, experienced, competent, ethical, and current in 1040 preparation.
To be of value a non-IRS administered voluntary ">RTRP-like designation must be overseen by an independent organization with industry-wide support and recognition and at least “acknowledgement” by the Internal Revenue Service. And it must be heavily promoted by the overseeing independent organization.
I also agree with Jason that, unfortunately, “no one’s heard of the EA designation either”. The fault lies with both the IRS and the NAEA. And with the actual designation itself. A large percentage of the public erroneously thinks an EA is actually an “agent” or employee of the IRS.
And I do agree that the mandatory IRS ">RTRP credential, when it was in force, did indeed “dilute” the EA credential. Many Enrolled Agents sat for and passed the IRS competency exam to get the ">RTRP designation solely for public relations purposes. As one EA told me, it is easier to tell a potential client that one is a “Registered Tax Return Preparer”, which is self-explanatory, than to have to explain what an Enrolled Agent is.
If there is to be an IRS-administered ">RTRP designation I have suggested that it be part of a two-tiered program that includes the current EA designation, which I would change to ETRP (Enrolled Tax Return Preparer).
“A preparer, again including Cs and attorneys, would first apply for and be granted the ">RTRP designation by way of a test that is limited to tax preparation (more involved than the original basic open-book basic test). Minimum annual CPE in federal tax topics would be required once the ">RTRP designation was granted. Those who had been designated an ">RTRP under the former regulation regime would be “grandfathered” into the new voluntary program, so the time and money they spent under the former mandatory ">RTRP program would not have been wasted.
After a year, an ">RTRP could elect to take a second test, with emphasis on taxpayer representation issues and other advanced topics, to become an ETRP (Enrolled Tax Return Preparer -- a new title for the current Enrolled Agent) and be permitted to “practice” before the IRS.”
The IRS would need to educate the public on the differences between the ">RTRP and the ERTP.
Regardless of who oversees the voluntary designation any competency test needs to be more extensive than the truly basic exam that was in effect under the mandatory regulation regime. And there must be grandfathering for experienced preparers who demonstrate they maintain annual CPE in taxation.
If there is a voluntary ">RTRP program I personally will not take advantage of it. I do not accept new 1040 clients, and am actually trying to “thin the herd” in anticipation of retirement, so I no longer have a need to be “recognized”.
So, Jason, does this post change your opinion in any way? And what about my idea for a 2-tiered program?