IRS Releases RTRP Exam Content

420,000 of over 730,000 PTIN Registrants are Non-Credentialed

By Jon A. Hayes,
TaxPreparerConnections.com

 

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The Internal Revenue Service has released specifications for the competency test that non-credentialed individuals must pass to become a Registered Tax Return Preparer.

In order to maintain the right to prepare federal 1040 returns for a fee, those who do not possess an IRS-approved credential (like the EA or CPA) must pass the RTRP test by December 31, 2013. They will also be required to 1) obtain a Preparer Tax Identification Number, 2) pass a background check and tax compliance check, and 3) complete 15 hours of continuing education annually to maintain their RTRP credential (beginning in 2012).

The major areas and their overall percentage of the examination are:

  • Preliminary work; collection of taxpayer data (15%)
  • Treatment of income and assets (22%)
  • Deductions and credits (22%)
  • Other taxes (11%)
  • Completion of the filing process (10%)
  • Practices and procedures (5%)
  • Ethics (15%)

Candidates may begin testing this fall. In order to take the test, you must have a PTIN. You can schedule your test directly from your online PTIN account.

The test will have approximately 120 questions in a combination of multiple choice and true or false format. The questions will be weighted and individuals will receive a pass or fail score, with diagnostic feedback provided to those who fail.

Test vendor Prometric Inc. worked with the IRS and the tax preparer community to develop the new test. The time limit for taking the test is expected to last between two and three hours. The test must be taken at one of the roughly 260 Prometric facilities nationwide.

Some reference materials will be available to individuals when they are taking the test, the IRS added. Prometric will provide individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials.

To assist in test preparation, the following is a list of recommended study materials. The list is not all-encompassing, the IRS noted, but a highlight of what the test candidates will need to know:

Publication 17, Your Federal Income Tax
Form 1040, U.S. Individual Income Tax Return
Form 1040 Instructions
Circular 230, Regulations Governing Practice before the Internal Revenue Service (rev. 8/2/11)
Publication 334, Tax Guide for Small Business
Publication 970, Tax Benefits for Education
Publication 1345, Handbook for Authorized IRS e-file Providers
Form 6251, Alternative Minimum Tax – Individuals
Form 6251 Instructions
Form 8879, IRS e-File Signature Authorization

The fee for the test has not been finalized but is expected to be between $100 and $125, which is separate from the PTIN user fee. Currently there is no limit on the number of times that preparers can take the test, but they must pay the fee each time they take the test. Individuals must pass the test only once.

Only certain individuals who prepare the Form 1040 series are required to take the test. Attorneys, CPAs and enrolled agents are exempt from testing and continuing education because of their more stringent professional testing and education requirements under Circular 230. Also exempt are supervised employees of attorneys, CPAs, attorneys or EAs who prepare but do not sign and are not required to sign the Form 1040 series returns they prepare, and individuals who prepare federal returns other than the Form 1040 series.

Click here for more details on who is required to pass a competency exam.

Approximately 730,000 return preparers have registered and received PTINs in 2011, according to the IRS. Approximately 62 percent (or 425,000) of them do not have professional credentials. The IRS said it does not yet know how many preparers will fall into the other exempt categories, but those individuals will be required to identify themselves when they renew an existing PTIN or obtain a new PTIN beginning in October 2011.

The IRS will notify those preparers who have a testing requirement and provide more details. Once the test is available, preparers who have on-line accounts at www.irs.gov/ptin can use their accounts to schedule a test time and select a Prometric site.

At the time the current version of Publication 17 went to press, there were certain tax benefits that had not been finalized and several tax benefits were subsequently extended. See Legislative Changes Affecting the 2010 Publication 17 on IRS.gov for the details needed for study purposes.

 

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