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California Tax Education Council

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The Limitations of Designations

Friday, July 1, 2011 - 0 comments

In May the IRS announced that nonexempt tax preparers who are required to meet its new federal rules cannot use the designation “registered tax return preparer” until they pass its competency exam.

The nitty gritty details to become an IRS registered tax return preparer are not yet finalized.  Tax preparers cannot use the new designation even if they have a Preparer Tax Identification Number (PTIN).  The PTIN is just the first step of the new IRS rules.

The IRS also said that it plans to revise Section 10.30 of Circular 230 on how registered tax return preparers can promote themselves and will require them to include the below wording in all future paid advertising:

“The IRS does not endorse any particular individual tax return preparer. For more information on tax return preparers go to IRS.gov.”

So let’s say a CTEC-registered tax preparer (CRTP) has met the new IRS requirements, which are set to take effect in 2012. Then what? For starters…

  • The new IRS regulations do not cancel out CTEC requirements. Basically CTEC tax preparers will have two titles—CTEC-registered tax preparer (CRTP) and IRS registered tax return preparer. Both designations can be advertised. 
  • Two designations will be required. Individuals who are preparing (or assisting with preparing) state and/or federal tax returns for a fee in California must meet both IRS and CTEC requirements. Attorneys, CPAs and enrolled agents are the only exception to the CTEC registration rule.
  • Just like the IRS, CTEC does not endorse any particular CRTP. CTEC can only tell consumers if the CRTP is compliant with California registration requirements. Endorsements are not allowed by CTEC no matter how wonderful the CRTP.
  • If a CRTP advertises, he/she should only use the term “registered” tax preparer. CRTPs are not licensed, certified, enrolled or public. Never use those terms. It is false advertising.
  • The IRS will be watching tax preparers and has promised to do background checks and enforcement. CTEC’s enforcement partner, the Franchise Tax Board, also plans to keep doing its visits to tax preparers statewide.

For more details about the new IRS rules, visit www.irs.gov/taxpros. Have a question about CTEC requirements? Call the office 877-850-2832 or post a comment.

 

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