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New Road to Become a Registered Tax Preparer

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Someone who works as a registered tax preparer can earn a good extra income—especially during the tax session. According to the National Society of Accountants, the average hourly rate for a tax preparer is $120, and it could be risen up to $200 for any additional tax schedule (Schedule C, etc).

The best part was; anyone who has basic knowledge of accounting, taxation and computer spreadsheet can be a tax preparer by taking practice tax forms at home. But that was in the past.

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Now, IRS requires all tax preparers to register with the office and receive a Preparer Tax Identification Number (PTIN). The other components of the IRS requirements include testing!

The test comes along with:

  • a background check;
  • tax compliance check; and
  • 15 hours of continuing education annually

Preparers who pass through the process will have a new designation as a: “Registered Tax Return Preparer“. So, it pays those who take the test a good dividend. Becoming an accredited tax preparer will make you a trusted professional who helps individuals with their accounting and tax needs.

What is The Fee Of Tax Preparer Testing Registration?

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 that preparers can take the test, but they must pay the fee each time they take the test. Individuals must pass the test only once.

Should I Apply For The Test?

No you don’t have to if you are an attorney; or a CPA; or an enrolled agent—for you have done more stringent professional testing and education requirements under Circular 230.

And, yes if you are an individual who prepare the Form 1040 series. You are not alone. Approximately 730,000 return preparers have registered and received PTINs in 2011, according to the IRS as it is cited by the AccountingToday.com. Approximately 62 percent of them do not have professional credentials. 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 (expected will be available starting this fall), preparers who have on-line accounts at www-irs.gov/ptin can use their accounts to schedule a test time and select a Prometric site.

Registered Tax Return Preparer Competency Test Spec

The IRS just released the specifications for the competency test that individuals must pass to become a Registered Tax Return Preparer. The specification listed seven core domain areas of competency along with its weight scale in percentage follows:

Domain-1:  Preliminary Work and Collection of Taxpayer Data (weight: 15%)

Domain 2: Treatment of Income and Assets (weight: 22%). This domain consisted of four main major topics: (a) Income; (b) Retirement Income; (c) Property, Real and Personal; and (d) Adjustments to Income.

Domain 3: Deductions and Credits (weight: 22%). This domain consisted of two major topics: (a) Itemized Deductions; and (b) Tax Credit.

Domain 4: Other Taxes (weight: 11%). Included in the domain are: Alternative Minimum Tax, Early distributions from retirement plans, Self-employment tax, Unreported Social Security and Medicare tax, Repayment of first-time home buyer credit.

Domain 5: Completion of the Filing Process (weight: 10%)

Domain 6: Practices and Procedures (weight: 5%)

Domain 7: Ethics Circular 230 Subparts A, B, and C (excluding D, E) (weight: 15%)

While individuals who already have a 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.

How Is the Tax Preparer Testing Conducted?

Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the new test. The preparer candidate must take the test at one of the roughly 260 Prometric facilities nationwide.

The time limit for taking the test is expected to last between two and three hours by answering approximately 120 questions in a combination of multiple choice and true or false format. The questions will be weighted and individuals will receive a pass or fail score.

Useful Resources For Registered Tax Preparer Testing

Some reference materials will be available to individuals when they are taking the test, according to IRS. Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.

For earlier preparation, here are recommended study materials:

Useful-Resources-For-Registered-Tax-Preparer-Test

The list is not all-encompassing, the IRS says in their release, but a highlight of what the test candidates will need to know. Last but not least, preparing taxes requires considerable research and attention to detail and accuracy, and it is essential be able to read thoroughly and quickly grasp an understanding of the material. Recognize that the laws are always changing, and it is necessary to keep acquiring additional knowledge.

1 Comment

1 Comment

  1. Ramon Aguilar

    Sep 8, 2011 at 1:45 pm

    Hi Putra,

    Its been a long time since I joint your group at Accounting and Finance at Linked In and I like to congratulated you for sharing this very important information in regards the new laws to becaome a Register Tax Preparer.

    Thank you, Ramon Aguilar,
    MBA-Accounting,
    Colorado Tech University Online.

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