PTIN

Technical topics regarding tax preparation.
#1
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Hi,

I am trying to answer this question:

If you prepared or assisted in the preparation of any tax returns for compensation or were Enrolled Agent (EA) during the 2017 calender year, you must 'Yes'.

Yes or No

I worked for an employer. I didn't prepare returns as self employed. Do I select Yes or No?

Accounting Web has an attorney that says that if I worked for an employer than I am not required to have a PTIN. The above question references assisting though.
 

#2
Frankly  
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What is the question and who is asking it?
 

#3
dave829  
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https://www.irs.gov/tax-professionals/p ... -preparers

Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid 2018 PTIN before preparing returns. All enrolled agents must also have a valid PTIN.
 

#4
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Another link that may help....see the scenarios section..... you really have to look at what you do for the employer. Data entry....no PTIN.....answer client questions even simple ones.....PTIN.

https://www.irs.gov/tax-professionals/f ... eed-a-ptin
 

#5
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What would be the penalties if someone failed to do the PTIN? I can't find any examples or how someone would mitigate any failure to get a PTIN? It just says penalties, etc. But, there is no examples and it is not specific.
 

#6
LW25  
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taxnyc123 wrote:What would be the penalties if someone failed to do the PTIN? I can't find any examples or how someone would mitigate any failure to get a PTIN? It just says penalties, etc. But, there is no examples and it is not specific.


From Internal Revenue Code section 6109(a)(4):

(4) Furnishing identifying number of tax return preparer.--

Any return or claim for refund prepared by a tax return preparer shall bear such identifying number for securing proper identification of such preparer, his employer, or both, as may be prescribed [ . . . ]


From section 6695(c):

(c) Failure to furnish identifying number.--

Any person who is a tax return preparer with respect to any return or claim for refund and who fails to comply with section 6109(a)(4) with respect to such return or claim shall pay a penalty of $50 for such failure, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. The maximum penalty imposed under this subsection on any person with respect to documents filed during any calendar year shall not exceed $25,000.


From section 7203:

Any person required under this title to [ . . .] supply any information, who willfully fails to [ . . . ] supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.
 

#7
LW25  
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Under the Treasury regulations, a tax return can have more than one tax return preparer. In such case, you have a "signing tax return preparer" and at least one "nonsigning tax return preparer." The signing tax return preparer must provide his or her PTIN in the return. However, as a practical matter, even a non-signing preparer must have a PTIN.

The Treasury regulation at 26 CFR sec. 1.6695-1(c) provides (in part):

(c) Failure to furnish identifying number. (1) A person who is a signing tax return preparer as described in §301.7701-15(b)(1) of this chapter of any return of tax under the Code or claim for refund of tax under the Code, and who fails to satisfy the requirement of section 6109(a)(4) and §1.6109-2(a) to furnish one or more identifying numbers of signing tax return preparers or persons employing the signing tax return preparer (or with which the signing tax return preparer is associated) on a return or claim for refund after it is completed and before it is presented to the taxpayer (or nontaxable entity) for signature shall be subject to a penalty of $50 for each failure, with a maximum of $25,000 per person imposed with respect to each calendar year, unless it is shown that the failure is due to reasonable cause and not due to willful neglect.


(emphasis added).

The Treasury regulation at 26 CFR section 301.7701-15 provides (in part):

(a) In general. A tax return preparer is any person who prepares for compensation, or who employs one or more persons to prepare for compensation, all or a substantial portion of any return of tax or any claim for refund of tax under the Internal Revenue Code (Code).

(b) Definitions—(1) Signing tax return preparer. A signing tax return preparer is the individual tax return preparer who has the primary responsibility for the overall substantive accuracy of the preparation of such return or claim for refund.

(2) Nonsigning tax return preparer—(i) In general. A nonsigning tax return preparer is any tax return preparer who is not a signing tax return preparer but who prepares all or a substantial portion of a return or claim for refund within the meaning of paragraph (b)(3) of this section with respect to events that have occurred at the time the advice is rendered. In determining whether an individual is a nonsigning tax return preparer, time spent on advice that is given after events have occurred that represents less than 5 percent of the aggregate time incurred by such individual with respect to the position(s) giving rise to the understatement shall not be taken into account. Notwithstanding the preceding sentence, time spent on advice before the events have occurred will be taken into account if all facts and circumstances show that the position(s) giving rise to the understatement is primarily attributable to the advice, the advice was substantially given before events occurred primarily to avoid treating the person giving the advice as a tax return preparer, and the advice given before events occurred was confirmed after events had occurred for purposes of preparing a tax return. Examples of nonsigning tax return preparers are tax return preparers who provide advice (written or oral) to a taxpayer (or to another tax return preparer) when that advice leads to a position or entry that constitutes a substantial portion of the return within the meaning of paragraph (b)(3) of this section.

[ . . .]

(3) Substantial portion. (i) Only a person who prepares all or a substantial portion of a return or claim for refund shall be considered to be a tax return preparer of the return or claim for refund. A person who renders tax advice on a position that is directly relevant to the determination of the existence, characterization, or amount of an entry on a return or claim for refund will be regarded as having prepared that entry. Whether a schedule, entry, or other portion of a return or claim for refund is a substantial portion is determined based upon whether the person knows or reasonably should know that the tax attributable to the schedule, entry, or other portion of a return or claim for refund is a substantial portion of the tax required to be shown on the return or claim for refund. A single tax entry may constitute a substantial portion of the tax required to be shown on a return. Factors to consider in determining whether a schedule, entry, or other portion of a return or claim for refund is a substantial portion include but are not limited to—

(A) the size and complexity of the item relative to the taxpayer's gross income; and

(B) the size of the understatement attributable to the item compared to the taxpayer's reported tax liability. [ . . .]


(emphasis added).
 

#8
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I don't see any examples of anyone being penalized for working at a firm and not having a PTIN. Also, non-signature preparers wouldn't count the number of returns they worked on. Also,

Any person required under this title to [ . . .] supply any information, who willfully fails to [ . . . ] supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.

This seems very harsh for non-signing preparers. What if CPA firms aren't even teaching their employees that they need a PTIN. Does that qualify as reasonable cause? Shouldn't the CPA firm itself be accountable and not the preparers? That seems fairer. It would be great to see some precedent with people working with the IRS in this situation. Maybe, this is a more common situation than I know of. The business owners are in a better position to determine who has prepared a substantial portion, etc. of the return because ultimately it is there responsibility to prepare the return.

Also, why does the question ask assist. To me it sounds as if the assist = prepared a substantial portion of a return

Based on how its worded I would guess there are a lot of incorrect responses. To me that is misleading. I may be wrong. I have another comment waiting for a response that I may make. Has anyone seen an exam question covering the PTIN?
 

#9
LW25  
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taxnyc123 wrote:I don't see any examples of anyone being penalized for working at a firm and not having a PTIN.[…].


I'm not sure what you mean. You "don't see any examples," because you haven't asked for any. Further, I'm not sure whether that kind of information is available.

Also, non-signature preparers wouldn't count the number of returns they worked on.


What are you driving at?

This [Code section 7203] seems very harsh for non-signing preparers....


But, that quote was provided in answer to your question. You asked, "what would be the penalties if someone failed to do the PTIN?". Nobody said that a tax return preparer has ever been prosecuted for failing to have a PTIN. The mere fact that a criminal or even civil penalty is provided in the law does not necessarily mean that the penalties are actually imposed on people. Indeed, Federal tax crime prosecutions of any kind, including more serious offenses such as tax evasion, are rare.

What if CPA firms aren't even teaching their employees that they need a PTIN.


If by "employees" you mean employees who are tax return preparers, why are you even asking the question? Why would you fear that a large number of CPA firms are not "teaching" their tax return preparers that they need a PTIN? You seem to be fearing that this is a big problem. Why? Obtaining at PTIN is a routine matter. What's the big deal?
 

#10
LW25  
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I can't find any examples or how someone would mitigate any failure to get a PTIN?


On second thought, that can be interpreted as a request for examples of people who were punished for not having a PTIN. I don't have any examples. I'll try to do some research on that.
 

#11
LW25  
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I have found a U.S. Tax Court case that might be relevant: Anyanwu v. Commissioner. I'll take a look at it.
 

#12
LW25  
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In Anyanwu v. Commissioner, case no. 006011-14S L, T.C. Summary Op. 2015-56 (Sept. 9, 2015), the taxpayer was a CPA who prepared Federal tax returns for compensation. The U.S. Tax Court was asked by the CPA to review a decision of the Internal Revenue Service that the CPA was liable for section 6695(c) penalties (of $50 per tax return) for failure to provide an appropriate identifying number on tax returns he prepared for compensation during the year 2010.

For returns prepared during 2010, the rule was that a paid tax return preparer had a choice; he or she could use his or her social security number as the identifying number, or he or she could obtain and use the preparer tax identification number (PTIN).

However, the CPA in this case did neither, exactly. Instead, he used only the last four digits of his social security number.

Had the CPA used his entire social security number, he would have been in compliance with the rule. However, the CPA explained to the Court that because he had previously been a victim of identity theft, he had not wanted to show his full social security number on the returns, and that he therefore had reasonable cause.

The Court rejected the CPA’s argument by pointing out that the CPA could have obtained and used a PTIN.

The Court found that the IRS had proved that the CPA had failed to provide the appropriate number on 90 returns. (At $50 per return, $50 x 90 returns, that would be a penalty of $4,500).

Note: Beginning with returns prepared on or after January 1, 2011, the rule changed. Paid preparers were no longer allowed to choose between using a social security number and a PTIN; they had to use the PTIN. That is the rule today.

What is unclear is why this penalty issue came to the attention of the IRS and why the IRS decided to hit hard -- except that the IRS had discovered the problem in connection with an audit of the CPA’s own personal tax return.
 

#13
makbo  
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LW25 wrote:the IRS had discovered the problem in connection with an audit of the CPA’s own personal tax return.


How's that? When I prepare my own return, there is no PTIN included, I am considered a non-paid preparer.
 

#14
LW25  
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makbo wrote:
LW25 wrote:the IRS had discovered the problem in connection with an audit of the CPA’s own personal tax return.


How's that? When I prepare my own return, there is no PTIN included, I am considered a non-paid preparer.


Yes, that's what I'm wondering, too. This is the only explanation provided by the Court:

The IRS audited Mr. Anyanwu's 2010 tax return, and this examination led the IRS to also investigate the tax returns Mr. Anyanwu prepared for tax year 2009. The IRS determined that Mr. Anyanwu did not include all of the information required of a tax return preparer on those returns.
 


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