What happened to the RTRP?
What does the RTRP, an IRS Lawsuit, and the Annual Filing Season Program have to do with tax preparer continuing education?
History of the RTRP Registered Tax Return Preparer Program
Based on a review led by IRS Commissioner Doug Shulman in 2009, the Internal Revenue Service announced January of 2010 that it would increase standards for return preparers with a new initiative called the Registered Tax Return Preparer (RTRP) program. The initiative mandated all tax return preparers register with the IRS and obtain a Preparer Tax Identification Number (PTIN). The RTRP program also stipulated that all non-exempt preparers pass a competency test, completing 15 hours of continuing education credits each year.
Certified Public Accountants, attorneys and Enrolled Agents were exempt from the testing and CE requirements. It was deemed these exempt individuals exceeded minimal requirements due to the testing and education needed to their credentials and licenses. Also exempt from the program were “non-1040” tax return preparers and “non-signing” preparers who were supervised by CPAs, attorneys or Enrolled Agents i.e. firms 80 percent owned by CPAs, attorneys and Enrolled Agents. Tax preparation volunteers that prepared returns without fee were exempt from all initiative provisions as well. The IRS plans allowed preparers who tested during the initial three-year implementation period to sit as many exams as they needed in order to pass provided they pay for the examinations.
The IRS developed a searchable online directory of tax return preparers that registered and passed the competency examination. The online directory allowed the general public to see whether a preparer had taken appropriate tests and had registered with the IRS. The online Directory of Federal Tax Return Preparers with Credentials and Select Qualifications is still in use today and allows the public to search the IRS database for tax preparers with the following credentials or qualifications:
- Attorney Credential
- Certified Public Accountant Credential
- Enrolled Agent Credential
- Enrolled Actuary Credential
- Enrolled Retirement Plan Agent Credential
- Annual Filing Season Program Participant
The RTRP stipulated that first time tax preparers pay $64.25 to register for a Preparer Tax Identification Number (PTIN). Existing preparers that already had a PTIN number assigned were required to register under the new program paying $63 each year for the renewal.
Prometric administered the RTRP competency exams for the IRS. The test consisted of 120 questions with multiple choice and true / false questions. Test takers had 2.5 hours to complete the entire RTRP exam. The fee to take the exam was $116 whether you passed or failed. The test was considered an open book in the sense that Prometric provided individuals with Publication 17, Form 1040 and Form 1040 instructions as reference materials during the exam.
Fast Forward Academy's RTRP Course Outline & Exam Specifications
The IRS has released specifications for the IRS Registered Tax Return Preparer (RTRP) competency test in conjunction with Prometric. The details of the IRS specification are listed below for your reference. The IRS has designed the RTRP basic preparer competency exam to cover ethical responsibilities, Form 1040 series, and related schedules and forms. The topics below are not set in stone and served as a general outline of potential topics on the IRS RTRP exam. Tax preparers were required to pass the exam in order to achieve the title Registered Tax Return Preparer (RTRP).
The IRS has released specifications for the IRS Registered Tax Return Preparer (RTRP) competency test in conjunction with Prometric.
1. Preliminary Work and Collection of Taxpayer Data
- Review prior year’s return for accuracy, comparison, and carryovers for current year return.
- Collect taxpayer’s biographical information (e.g., date of birth, age, marital status, citizenship, dependents)
- Determine filing status
- Determine all sources of taxable and non-taxable income (e.g., wages, interest, business, sale of property, dividends, rental income, income from flow-through entities, alimony, government payments, and pension distributions).
- Determine applicable adjustments to gross income (e.g., self-employed health insurance, self employment tax, student loan interest deduction, alimony paid, tuition, and fees deduction).
- Determine standard deduction and Schedule A itemized deductions (i.e., state and local tax, real estate tax, cash contributions, non-cash contributions, unreimbursed employee expense, medical expense, and mortgage interest).
- Determine applicable credits (e.g., earned income tax credit, child tax credit, education, retirement savings, dependent and child care credit).
- Understand tax payments (e.g., withholding, estimated payments).
- Recognize items that will affect future returns (e.g., carryovers, depreciation).
- Determine special filing requirements (e.g., presidentially declared disaster areas).
- Determine filing requirements (including extensions and amended returns).
- Understand due dates, including extensions.
- Determine personal exemptions, including dependents.
- Determine qualifying child/relative tests for Earned Income Credit.
2. Treatment of Income and Assets
- Income
- Taxability of wages, salaries, tips, and other earnings (e.g., W-2 Wage and Tax Statement, cash).
- Interest Income (taxable and non-taxable) (e.g., Schedule B and 1099-INT).
- Dividend Income (e.g., Schedule B and 1099-DIV).
- Self-employment income and expenses (e.g., Schedule C Profit or Loss From Business and Form 1099-MISC Miscellaneous Income, cash).
- Rental income and expenses (e.g., Schedule E Supplemental Income and Loss).
- Identification of forgiveness of debt as income (including Form 1099-C Cancellation of Debt).
- Other income (e.g., alimony, barter income, hobby income, non taxable combat pay, state income tax refund from prior years, prizes).
- Retirement Income
- Reporting requirements of Social Security benefits (e.g., Form SSA-1099 Social Security Benefit Statement).
- Taxable distribution from an IRA including basis in an IRA (e.g., Form 8606 Non-deductible IRAs).
- Distributions from qualified plans (e.g., 401k, IRA, Roth IRA).
- Required minimum distributions from retirement plans.
- Property, Real and Personal
- Short-term and long-term capital gains and losses (e.g., Schedule D Capital Gains and Losses, Form 1099-B Proceeds From Broker and Barter Exchange Transactions).
- Determination of basis of assets (e.g., purchased, gifted, or inherited).
- Sale of non-business assets (gains or losses).
- Sale of a principal residence (e.g., IRC 121 exclusions, 1099S Proceeds From Real Estate Transactions).
- Adjustments to Income
- Self-employment tax (e.g., Schedule SE Self-Employment Tax).
- Tuition and fees – (e.g., Form 8917 Tuition and Fees Deduction, Form 1098T Tuition Statement).
- Eligible Moving expenses – (e.g., Form 3903 Moving Expenses).
- Other adjustments to income (e.g., IRA contribution deduction).
3. Deductions and Credits
- Itemized Deductions
- Medical and dental expenses.
- State, local, and real estate taxes.
- Mortgage interest expense - (e.g., Form 1098 Mortgage Interest Statement).
- Charitable contributions (e.g., cash, non-cash, Form 8283 Non-Cash Charitable Contributions).
- Miscellaneous itemized deductions – (including deductions subject to 2% AGI Limit).
- Employee travel, transportation, education, and entertainment expenses – (e.g., Form 2106-EZ and Form 2106 Unreimbursed Employee Business Expenses).
- Credits
- Child and dependent care credit (e.g., Form 2441 Child and Dependent Care Expenses).
- Child tax credit and additional child tax credit (e.g., Form 8812, Additional Child Tax Credit).
- Education credits – (e.g., Form 8863 Education Credits (American Opportunity and Lifetime Learning Credits), Form 1098T Tuition Statement).
- Earned Income Tax Credit (EITC) (e.g., Schedule EIC Earned Income Credit, Form 8867 Paid Preparer’s Earned Income Credit Checklist).
- Retirement savings contribution credit – (e.g., Form 8880 Credit for Qualified Retirement Savings Contributions).
4. Other Taxes
- Alternative Minimum Tax (e.g., Form 6251 Alternative Minimum Tax).
- Early distributions from retirement plans – (e.g., Form 5329 Additional Tax on Qualified Plans).
- Self-employment tax (e.g., Schedule SE Self-Employment Tax).
- Unreported Social Security and Medicare tax – (e.g., Form 4137 Social Security and Medicare Tax on Unreported Tip Income).
- Repayment of first-time home buyer credit (including Form 5405 First-Time Homebuyer Credit and Repayment of the Credit).
5. Completion of the Filing Process
- Check return for completeness and accuracy.
- Explain and review tax return.
- Explain record-keeping requirements to the taxpayer.
- Discuss significance of signatures (e.g., joint and several liability, penalty of perjury, Form 8879 IRS e-file Signature Authorization).
- Understand tax preparer's responsibilities related to rejected electronic returns.
- Understand timeframe for submitting electronic returns – (e.g., Form 8879 taxpayer signature and date prior to submission).
- Understand payment options (e.g., check, direct debit, EFTPS, credit card, installment agreement-Form 9465).
- Understand estimated tax payment requirements (e.g., potential for penalties, Form 1040-ES Estimated Tax).
- Understand refund options – (e.g., Form 8888 Allocation of Refund).
6. Practices and Procedures
- Penalties to be assessed by the IRS against a preparer for negligent or intentional disregard of rules and regulations, and for a willful understatement of liability (e.g., IRC 6694(a), IRC 6694(b)).
- Appropriate use of Form 8867 Paid Preparer’s Earned Income Credit Checklist and related penalty for failure to exercise due diligence (e.g., IRC 6695(g)).
- Furnishing a copy of a return to a taxpayer (e.g., IRC 6695(a)).
- Signing returns and furnishing identifying (PTIN) numbers (e.g., IRC 6695(b), IRC 6695(c)).
- Rules for the return preparer for keeping copies and/or lists of returns prepared (e.g., IRC 6695(d)).
- Compliance with e-file procedures (e.g., timing of taxpayer signature, timing of filing, recordkeeping, prohibited filing with pay stub).
- Completion and use of Form 2848 Power of Attorney and Declaration of Representative and Form 8821 Tax Information Authorization.
- Safeguarding taxpayer information – (e.g., Publication 4600 Safeguarding Taxpayer Information, Quick Reference Guide for Business, IRC 7216).
7. Ethics Circular 230 Subparts A, B, and C (excluding D, E), but not limited to the following:
- Preparer's due diligence for accuracy of representations made to clients and the IRS; reliance on third-party work products.
- What constitutes practice before the IRS and categories of individuals who may practice.
- Limits on practice by a registered tax return preparer.
- Requirement to furnish information to IRS upon request.
- Prompt disposition of matters before the IRS.
- Prohibition on receiving assistance from or providing assistance to disciplined practitioners.
- Rules regarding fees, including contingent fees.
- Rules in dealing with clients, including return of client records, conflicts of interest, advising on omissions and errors, solicitation (including advertising), and negotiation of taxpayer refund checks.
- Due diligence standards with respect to tax returns and other documents; standards for signing, advising positions on returns and advising submissions of other documents; advising on penalties; good faith reliance on client information; reasonable inquiries regarding incomplete, inconsistent, incorrect information.
- Responsibility of individual(s) who have principal authority over a firm’s tax practice
- Incompetence and disreputable conduct that can result in disciplinary proceedings.
- Sanctions that may be imposed under Circular 230.
RIP RTRP? End of the RTRP
On January 18th, 2013, the United States District Court for the District of Columbia ruled in favor of plaintiffs permanently enjoining the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with the order, tax return preparers covered by this program were no longer required to register with the IRS, to complete competency testing or secure continuing education. The ruling did not affect the regulatory practice requirements for CPAs, attorneys, Enrolled Agents, Enrolled Retirement Plan Agents or Enrolled Actuaries. Essentially the court ruled that the IRS lacked authority from Congress to regulate tax preparers and as such was no longer able to enforce the mandates set forth by the Registered Tax Preparer Program.
Launch of the IRS Preparer Directory Directory of Federal Tax Return Preparers
On February 5th, 2015, the Internal Revenue Service rolled out the Directory of Federal Tax Return Preparers. The purpose of the directory was to give the general public a way to research tax return preparers in their area and determine the type of credentials or qualifications held by a specific tax professional. It is important to note that not every tax return preparer is represented in the directory. The directory contains only those with a PTIN who hold a professional credential that opted in, and or have obtained an Annual Filing Season Program Record of Completion from the IRS. The directory includes some search, and sort features which allow someone to locate practitioners by name, city, state and zip code as well as pertinent licence, credential, or certificate.
Voluntary AFSP Annual Filing Season Program
The Annual Filing Season Program was developed to acknowledge efforts of non-credentialed return preparers that aim for a higher level of professionalism. Individuals that participate in the AFSP can meet specific requirements by obtaining 18 hours of continuing education, including a six hour federal tax law refresher course with an exam. The return preparer must also renew their preparer tax identification number (PTIN) for the upcoming year and consent to adhere to the obligations in Circular 230, Subpart B and section 10.51.
Upon completion of these requirements, return preparers receive an Annual Filing Season Program Record of Completion from the IRS.
Already passed the RTRP? Past RTRP Participants
Those who passed the Registered Tax Return Preparer test and certain other recognized national and state tests are exempt from the six hour federal tax law refresher course with an exam and only need 15 hours of continuing education each year to obtain an Annual Filing Season Program Record of Completion.
*Please Note: Exempt individuals (including former Registered Tax Return Preparers) must also consent to the Circular 230 obligations to officially participate in the Annual Filing Season Program. View the video on the right side of this page for a demonstration.
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