Changes Due For Tax Return Preparers

September 2011

IRS mandates 15 hours of CE annually

As early as January 2012, the Internal Revenue Service will be putting into place new regulations requiring that all paid tax preparers take 15 hours of continuing education annually.

According to the IRS, preparers who are not attorneys, CPAs or enrolled agents who prepare Form 1040 series returns will be required to obtain the annual credits. There are an estimated 650,000 registered tax return preparers nationwide and approximately 400,000 of them will be affected by this regulation. The continuing education must consist of two hours of ethics or professional conduct, three hours of federal tax-law updates and 10 hours of federal tax-law topics.

Under the IRS' Circular 230, which lays out the rules that attorneys, CPAs, enrolled agents and others who prepare tax returns and give tax advice must follow, preparers are required to pass a one-time competency exam, undergo a suitability check and pay an annual fee for their Preparers Tax Identification Number, or PTIN. The new continuing-education requirements will be in addition to, and not replace any of, these existing requirements.

The IRS estimates that there are somewhere between 2,200 and 3,000 continuing education providers in the pool that could potentially serve this new group of continuing education consumers. Of those, approximately 1,700 are currently members of NASBA's National Registry of CPE Sponsors. NASBA sees this as an opportunity for its continuing-education providers to tap into a major new market and has provided input to the IRS about the quality of the National Registry, and its standards, procedures and providers.
Under the new regulations, a continuing education provider must fall into one of the following four categories:

  1. Be an accredited educational institution;
  2. Be recognized for continuing education purposes by the licensing body of any U.S. jurisdiction;
  3. Be recognized and approved by an accrediting organization; or
  4. Be recognized and approved by the IRS.

All members of the National Registry of CPE Sponsors qualify as continuing-education providers because they are recognized by NASBA's state boards of accountancy. As such, sponsors will be required to complete an abbreviated registration process with the IRS in order to obtain a continuing education provider number, but will not be required to complete a separate approval process.
The IRS has yet to finalize some specific details regarding who will be considered an accrediting organization or how the process to be recognized and approved by the IRS will work; but the IRS has solicited comments on these topics. NASBA has been following the IRS and the Treasury Department's work closely, and provided commentary to the IRS in response to the IRS' Notice 2011-61 requesting feedback.

In that commentary, NASBA highlights the experience and expertise of its National Registry of CPE Sponsors. NASBA also addresses the need to have not only a quality approval process, but also high-quality standards providers must meet. NASBA feels that a strong foundation of standards will be the linchpin of the IRS' new regulatory structure for both providers and preparers, because they will give a framework for measuring quality. To that end, NASBA called attention to the Statement on Standards for CPE Programs, and how those were created through a joint process with the AICPA. It also was pointed out that the Standards continue to be updated, administered and enforced very effectively.

Since the IRS wants to begin requiring continuing education by January 1, 2012, it will be moving quickly. NASBA is recommending that it have providers approved by October 1st in order to meet that start-up date, and that its Registry members be in that inaugural class. Should the agency concur, NASBA's CPE providers would only have to register, not be approved, and would be ready to to create programs in advance of January 2012.

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