New Fees and Requirements Levied on Income Tax Preparers in 2019

If you're a tax preparer who is still winding down from Tax Day 2019, you may be interested in two major developments coming down the pike for those who plan to help others prepare their 2019 federal or state income taxes. 

IRS Can Start Charging for Preparer Tax Identification Numbers (PTINs)

In early May 2019, the D.C. Circuit Court of Appeals issued a ruling in which it held that the IRS can legally charge a fee for issuing (or renewing) a PTIN. These identification numbers are required of anyone who assists someone else in preparing a return and is paid for doing so. 

Although the District of Columbia District Court had previously found that the IRS's levy of this fee was an overreach of its authority, the D.C. Circuit disagreed, holding that the IRS's actions were not sufficiently "arbitrary or capricious" to justify court intervention.

Unless the Supreme Court of the United States opts to take an appeal from this decision or the IRS extends a grace period before implementing fees, this means that tax preparers who plan to renew or obtain their PTIN before Tax Day 2020 will likely be charged to do so.

Tax Preparers Under Extra Scrutiny For Head-of-Household Deductions

Although tax preparers aren't necessarily held liable for false or fraudulent taxpayer information they transmit to the IRS, under current regulations, a practitioner must "make reasonable inquiries" of the taxpayer if the information he or she provides seems suspicious. Under the Tax Cuts and Jobs Act, a tax preparer that helps a client improperly claim various Head of Household (HoH) deductions (like the child tax credit or the American Opportunity tax credit) can be assessed a $520 penalty for each improper return. 

Knowing these guidelines can both keep you on track for the upcoming tax season and ensure you don't inadvertently wind up in hot water with the IRS.