IRS Changes Who Can Represent Taxpayers

This posting touches on two issues.  First, just in case you haven’t heard, IRS lost the Loving case including the Appeal.  IRS has chosen not to appeal the case any further.  Therefore the Registered Tax Return Preparer (RTRP) program no longer exists.  Tax return preparers who are NOT EAs, CPAs, or attorneys no longer have to pass an exam or take continuing education.  (Everyone still has to have a PTIN in order to prepare income tax returns.)

But don’t be misled into thinking that the IRS is done with this issue. The IRS has created a new voluntary program entitled Annual Filing Season Program Record of Completion.  The purpose seems to insure a level of quality among tax professionals.  However, for the unenrolled preparer, the cost of not getting this Record of Completion affects the representation ability of that preparer with regard to the returns he/she has prepared and signed.

** REPRESENTATION RIGHTS – An unenrolled preparer in the past could represent a taxpayer if the unenrolled preparer prepared the return and signed it as the paid preparer.  This right was removed when Circular 230 was changed to include the creation and existence of RTRPs.  This change made sense since all preparers were either enrolled preparers or RTRPs.

Now that RTRPs have been removed from Circular 230, IRS reinstated the representation rights of unenrolled preparer BUT NOT EXACTLY AS BEFORE.  Now an unenrolled preparer can only represent a client if the unenrolled preparer:
a) Prepared the return,
b) Signed the return as a paid preparer, AND
c) Has an ANNUAL FILING SEASON PROGRAM RECORD OF COMPLETION for that calendar year.

Now IRS has released Revenue Procedure 2014-42 (RP 2014-42) which addresses two areas:  1) optional continuing education for unenrolled preparers, and 2) a change in the rights of unenrolled preparers to represent their clients.

We are not going to go into details on the option continuing education except to say it involves 18 CPEs in a year of which 6 must be federal tax law update and 2 must be ethics.  To get the IRS Annual Filing Season Program Record of Completion requires taking and passing a 100-question test at the end of the 6 hours of federal tax law update CPEs.  This program is VOLUNTARY and no preparer is required to participate.  It is open to all preparers.  CPAs, EAs, attorneys, and those that passed the RTRP exam do not need to take the test.  The Revenue Procedure lists a few others who do not have to pass the exam such as those in states where passing an exam is required in order to prepare tax returns.  Check the Revenue Procedure for details.

This leaves the question of “Since this education and testing is not required, why should someone jump on this program?”  The answer is the second part which is the recent IRS change in the rights of unenrolled preparers to represent their clients.  The most recent revision of Circular 230 removed the representation rights of RTRPs and replaced it with representation rights for tax professionals who have an Annual Filing Season Program Record of Completion.  A tax professional who has this Annual Filing Season Program Record of Completion can represent taxpayers regarding tax returns in front of the Examination Division of IRS but only if the professional prepared and signed the return as the paid preparer.  This representation right only applies to the Examination Division and only applies in connection with returns prepared AFTER the Annual Filing Season Program Record of Completion is issued.

Due to not having these procedures out prior to 2014, there is a transition rule in effect for one year.  For the 2015 calendar year, applicants are required to complete only 11 hours of continuing education during 2014 which must include 2 hours of ethics or professional responsibility, 3 hours of federal tax law topics, and 6 hours of federal tax law update.  Again the refresher course will satisfy the 6 hours of federal tax law update.

This application must be received by IRS by April 15 of the year for which the Record of Completion is sought.  Once issued the Record of Completion is effective for the calendar year and for tax returns and claims for refund prepared and signed from the later of: 1) January 1 of the year covered by the Record of Completion, or 2) the date the Record of Completion is issued until December 31 of that year.  For example if an application is submitted on February 15, 2015, and a Record of Completion is issued on February 25, 2015, the tax return preparer’s 2015 Record of Completion will be effective for tax returns and claims for refund prepared and signed from February 25, 2015 through December 31, 2015.  This makes is sound like preparers should apply for this before the end of the prior year if it is desired to have it effective for the entire upcoming calendar year.

Unenrolled preparers WITHOUT this Annual Filing Season Program Record of Completion can still represent taxpayers if the unenrolled preparer prepared the return and signed it as the paid preparer ON OR BEFORE December 31, 2015.

A copy of the Revenue Procedure can be found at www.irs.gov/pub/ by clicking on irs-drop and then on rp-14-42.

This text has been shared with you courtesy of:  David & Mary Mellem, EAs and Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111), davidmellem@yahoo.com, davidmellemea@yahoo.com,marymellem@yahoo.com, marymellemea@yahoo.com.