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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
Individuals who are paid to prepare Form 5500s do not have to obtain a preparer tax identification number (PTIN), according to guidance recently issued by the IRS. Beginning after December 31, 2010, the IRS requires all tax return preparers who are compensated for preparing, or assisting in the preparation of, all or substantially all of a U.S. federal tax return or claim for refund to have obtained a PTIN. The IRS is now providing guidance on the requirement to obtain a PTIN and on the forms that qualify as tax returns or claims for refunds for purposes of the PTIN rules. The IRS also is furnishing interim rules for certain PTIN holders during the implementation phase of the new PTIN rules.
In order to improve oversight of tax return preparers, the IRS has, in the last few months, issued regulations and other guidance addressing tax return preparer PTIN requirements, user fees to apply for or renew a PTIN, competency testing and continuing education requirements, and the extension of the ethics rules under Circular 230. The American Society of Pension Professionals & Actuaries (ASPPA) asked the IRS to clarify and limit the new paid tax return preparer registration process for Form 5500 preparation, noting that Form 5500 is primarily an information return and that the new registration process would likely lead to higher retirement plan administration costs and lower benefits for plan participants (see CCH Pension Plan Guide Newsletter, Report No. 1857, October 4, 2010).
Forms that are not tax returns
The IRS may specify which forms, schedules, and other forms qualify as tax returns or claims for refund for purposes of the PTIN requirements. The IRS states that all tax returns, claims for refund, or other tax forms submitted to the IRS are considered tax returns or claims for refund, unless otherwise provided by the IRS. Thus, an individual must obtain a PTIN to prepare for compensation all or substantially all of any form, except for those forms specifically identified by the IRS as not subject to PTIN requirements. The IRS has listed many forms that are not subject to the PTIN requirements. These forms include Form 5500, Form 5300, Form 5307, Form 5310, Form 8717, the Form 1099 series, the W-2 series, and Form 2848. The IRS notes that it may modify this list in the future.
Individuals who obtain a PTIN
For individuals who obtain a PTIN, the IRS confirms that tax return preparers who obtain a PTIN or a provisional PTIN and pay a user fee after September 28, 2010 have applied for and received a PTIN in the manner prescribed by the IRS for purposes of Code Sec. 6109 regulations.
Beginning after December 31, 2010, a tax return preparer must be an attorney, certified public accountant (CPA), enrolled agent, or registered tax return preparer to obtain a PTIN. However, the IRS may make exceptions. The IRS has decided to allow certain individuals who are not attorneys, CPAs, enrolled agents, or registered tax return preparers to obtain a PTIN and prepare, or assist in the preparation of, tax returns under specific circumstances.
Supervised tax return preparers. Until further guidance is issued, the IRS will allow any individual 18 years or older to pay a user fee and obtain a PTIN that permits the individual to prepare, or assist in the preparation of, all or substantially all of a tax return or claim for refund for compensation if: (1) the individual is supervised by an attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary; (2) the supervising attorney, CPA, enrolled agent, enrolled retirement plan agent, or enrolled actuary signs the tax returns or claims for refund prepared by the individual; (3) the individual is employed at the law firm, certified public accounting firm, or other recognized firm of the tax return preparer who signs the tax return or claim for refund; and (4) the individual passes the required tax compliance check and suitability check (when available).
These individuals will not be subject to a competency examination or continuing education requirements. The IRS states that these individuals may not sign any tax return that they help prepare, represent taxpayers before the IRS in any capacity, or represent themselves as registered tax return preparers or Circular 230 practitioners.
Individuals who prepare tax retuns not covered in competency exam. The IRS notes that tax return preparers will be required to pass a competency test. The IRS expects that the competency test will initially cover only individual income tax returns (the Form 1040 series). Although the IRS anticipates that the types of forms and claims for refunds covered by the competency test may expand in the future, the IRS recognizes that some compensated tax return preparers do not prepare Form 1040. Until further guidance is provided, the IRS has determined that these individuals should not be required to pass a competency test covering forms not prepared by the individuals in order to obtain a PTIN. In addition, these individuals are not currently required to satisfy the same continuing education requirements that a registered tax return preparer must complete to renew their PTIN. However, the IRS notes that in the future the IRS may require these individuals to complete continuing education to renew their PTIN.
These individuals may sign the tax returns or claims for refund that they prepare for compensation as the paid preparer. They may also represent taxpayers before the IRS during an examination if they signed the tax return or claim for refund for the taxable year under examination. However, the IRS states that they may not represent themselves as a registered tax return preparer or a Circular 230 practitioner. The IRS explains that enrolled retirement plan agents and enrolled actuaries who obtain a PTIN under this exception may continue to practice and represent as provided in Circular 230.
Provisional PTINs
As noted above, an individual may be designated as a registered tax return preparer if the individual successfully completes a competency examination. However, the IRS does not expect to offer the competency test before mid 2011. Until the competency test is available, the IRS, as an interim rule, will allow individuals who are not attorneys, CPAs, or enrolled agents to obtain a provisional PTIN before the date the test is first offered. The IRS will generally not issue provisional PTINs in accordance with this interim rule after the date the test is first offered. Until December 31, 2013, a provisional PTIN may be renewed upon application and payment of the applicable user fee, even if the individual with the provisional PTIN is not an attorney, CPA, enrolled agent, or registered tax return preparer. After December 31, 2013, provisional PTINs will generally not be renewed.
Source: IRS Notice 2011-6, I.R.B. 2011-3, January 17, 2011.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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