The Preparer Tax Identification Number (PTIN) is an identification number that all paid tax return preparers must use on U.S. federal tax returns or claims for refund submitted to the Internal Revenue Service. Anyone who, for compensation, prepares all or substantially all of any federal tax return or claim for refund must have a valid PTIN, which means a PTIN issued after September 28, 2010 when a new PTIN sign-up system was launched. Taxpayers who use paid tax return preparers should only use those professionals who will sign the return and use a valid identification number.[1]
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The Preparer Tax Identification Number was created in 1999 to protect the privacy of tax return preparers. Preparers were required to sign the tax forms they prepared and provide their Social Security Numbers. Starting with the 2000 tax season, the IRS gave preparers the option of using either their SSNs or PTINs.[2] Between August 1999 and August 2010, the IRS issued more than 1 million PTINs. Starting January 1, 2011, use of the PTIN will be mandatory.
Mandatory use of the PTIN is the first significant step in the IRS effort to regulate the tax return preparation industry. The IRS Return Preparer Initiative, announced January 4, 2010, requires all paid tax return preparers to obtain and use a PTIN starting January 1, 2011. This includes those preparers who substantially prepare a return, even though they are not the signer of the return. The multi-year effort also recommends that certain paid preparers pass a competency test, take continuing education courses and adhere to standard ethical rules. Tax return preparers who fail to meet these requirements could have their PTIN revoked or not renewed. Without a valid PTIN, they would be unable to legally preparer tax returns for compensation.[3] Once the competency test becomes available in mid-2011, preparers without PTINs and who are not exempt from testing, must first pass the exam before they can submit a PTIN application.
Attorneys, certified public accountants (CPAs), and enrolled agents are currently exempt from the testing and continuing education requirements in connection with the PTIN. At this time, employees of attorneys, CPAs, and enrolled agents who substantially prepare, but do not sign, a return also must obtain a PTIN.
The IRS on September 28, 2010 launched a new, electronic PTIN sign-up system accessible through its website at www.irs.gov/taxpros. The new sign-up system requires return preparers to create an account, complete the PTIN application, pay a $64.25 fee and get a PTIN.[4] By creating an account, preparers will be creating a central location where they can receive IRS information and track their progress on testing or education courses if they must meet those requirements. Completion of a PTIN application takes only a few minutes. Preparers will be asked about their tax compliance and should resolve any outstanding issues with the IRS prior to submitting an application. Preparers can pay the $64.25 fee on line via credit or debit card. Of the fee, $50 goes to the IRS to implement and maintain the Return Preparer Initiative and $14.25 to the vendor who created and maintains the sign-up system.[5] Once the fee is paid, preparers should receive their PTINs immediately. Even preparers who already have PTINs must renew their numbers if they received them prior to September 28, 2010. If all information matches, preparers may receive the same number. The PTIN must be renewed annually.
Each preparer must have his or her personal PTIN. Sharing a PTIN within an office or firm is not allowed. Preparers can submit a paper application, the Form W-12, but it will take four to six weeks to process. The electronic PTIN sign-up system takes 15 minutes to complete and process. Preparers can view an IRS YouTube video that explains the PTIN sign-up system.
Preparers who do not have social security numbers because of religious objections can complete the PTIN application and submit paper Form 8945, PTIN Supplemental Application For U.S. Citizens Without a Social Security Number Due To Conscientious Religious Objection. They must also include documentation on identity, U.S. citizenship and status in a recognized religious group.[6]
Foreign tax return preparers who prepare U.S. tax returns must also obtain and use a PTIN. Foreign preparers who do not have or who are not eligible for social security numbers must complete the PTIN application and submit paper Form 8946, PTIN Supplemental Application For Foreign Persons Without a Social Security Number. Only preparers who have a foreign (non-U.S.) address may file this form.[6]
In October 2010, the IRS began sending notices to the 1 million PTIN holders it had on record, informing them of the rule changes and urging them to obtain a new or renewed PTIN before preparing tax returns in 2011.[7] However, the agency does not know how many of those 1 million PTIN holders are still active tax return preparers. Nor, does the agency know how many total tax return preparers there are in the United States. It estimates the number at 900,000 to 1.2 million.
Return preparers who fail to obtain and use PTINs could face penalties. The IRS announced in November 2010 that it would not put the onus of compliance on individual taxpayers by rejecting tax returns without valid PTINs. However, the agency said it would contact those tax return preparers and urge them to comply with the PTIN mandate.[8]