IRS Begins Preparer Competency Tests

The Internal Revenue Service is moving into the second phase of its tax preparer regulation initiative by beginning next week to schedule the first competency tests for tax preparers.

The IRS said it is launching the new competency tests for Registered Tax Return Preparers as part of a larger initiative to increase its oversight of the tax prep industry. Last year, in the first phase of its efforts, the IRS required all paid tax return preparers to obtain a Preparer Tax Identification Number. Those tax return preparers who currently have a valid PTIN and are required to take the new test will have until Dec. 31, 2013, to pass the test. The third phase will involve continuing education.

Preparers who pass the test and meet other requirements will be given a new designation: Registered Tax Return Preparer. In order to maintain that designation, the individuals must renew their PTINs annually and complete 15 hours of continuing education each year. Enrolled agents, CPAs, and attorneys, among others, are exempt from the new testing and education requirements. These professional groups already meet more stringent guidelines to obtain their professional credentials.

The fee for the new competency test is $116, which includes the IRS portion of the fee and the fee for third-party test vendor Prometric Inc. The test covers preparation of the Form 1040 and its related schedules. Test scheduling begins next week, but the initial test takers won't receive their test scores for two to six weeks to allow the IRS time 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.

Prometric will eventually administer the test at more than 260 centers nationally.

For more information visit: www.IRS.gov/taxpros/tests.