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Monday, September 19, 2011

Registered Tax Return Preparer Exam Coming Soon

The exam that preparers who are not a CPA, attorney or Enrolled Agent (or supervised, non-signing preparer) will need to take to continue to prepare 1040 returns after 2013 is expected to be available in October. Once the tests are available, someone getting a PTIN for the first time who is required to take the test apparently must pass it before getting a PTIN. The fee to take the exam is expected to be between $100 and $125 (for each time a person needs to take it).

The IRS has laid out the topics to be covered - here.

The IRS suggests that a person get ready for the test by reviewing these materials:
2010 Form 1040
2010 Form 1040 Instructions
2010 Publication 17: Your Federal Income Tax*
Circular 230 (Rev. 8-2011): Regulations Governing Practice Before the Internal Revenue Service
2010 Publication 334: Tax Guide for Small Business
2010 Publication 970: Tax Benefits for Education
2010 Publication 1345: Handbook for Authorized IRS e-file Providers
2010 Form 6251: Alternative Minimum Tax – Individuals
2010 Form 6251 Instructions
2010 Form 8879: IRS e-File Signature Authorization
2010 Publication 596: Earned Income Credit

As I have noted in prior posts and articles, I think there is a disconnect in what the IRS is saying a preparer should know because sometimes they say they must know the substantive law (which should mean the Code, regs and court cases) other times, they say to look at pubs and form instructions which do not make reference to primary authority.

The questions will be multiple choice and true-false. There will likely be 120 questions with 2 - 3 hours to complete the exam.

Well, if an exam is prepared by using Pub 17 (which is 295 pages long!), what might some of the questions be? Might these by the questions? Do you know the answers?

1. Don is single and his girlfriend has been living with him for the past two years. She is a full-time college student who does not work. Don supports her. Don't filing status is:
A. Single
B. Head-of-household
C. Married filing joint (because he has lived with his girlfriend for over one year)
D. Married filing separately (because he and his girlfriend are not married)

2. Mr. and Mrs. Smith file jointly and itemize their deductions. Mrs. Smith volunteers for a local non-profit agency tutoring children about 5 hours per week. If Mrs. Smith provided these services for pay, she would get $50 per hour. She hires a babysitter to watch her children while she volunteers. The non-profit is about 10 miles from her home. In 2010, Mrs. Smith spent $65 on books to use with the kids she tutors. Which of the following constitute a charitable contribution deduction for the Smiths?
A. $250 per week for value of her contributed services
B. 14 cents per mile traveled
C. The $65 of books
D. The fee paid to the babysitter
E. None of the above.

1. A. The girlfriend can't qualify Don for HH filing status because she is not a qualifying person. See page 23 of Pub 17.

2. B & C. There is no deduction allowed for the value of donated services or for the babysitting. 14 cents per mile + $65 for expenses are deductible as charitable contributions. See page2 158-159 of Pub 17.

What do you think? Were my sample questions too easy? too hard? not relevant? What do you think should be asked?

For more on who is subject to the tests - see this IRS page.
My articles on the IRS program to regulate return preparers - here.


Milbrun L. Pearson II said...

I am glad other preparers are being held to a high standard. Being a CPA and having to correct a lot of errors and mistakes is very frustrating. The IRS should have done this a long time ago now hopefully the preparers that are not serious will no longer be in the industry.

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salesroles said...

interesting article, perhaps it may clear things up

Unknown said...

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Thanks for the post.
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