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CCH® PENSION — 10/11/10

ASPPA asks IRS to clarify/limit tax return preparer registration for Form 5500 preparers

The American Society of Pension Professionals & Actuaries (ASPPA) is urging the IRS to clarify and limit how the paid tax return preparer registration process and Circular 230 rules will apply to employees who only input data collected for Form 5500 preparation, according to Craig P. Hoffman, General Counsel and Director of Regulatory Affairs of ASPPA.

ASPPA supports the new IRS initiatives to register paid tax return preparers and improve their training, he says. However, ASPPA is concerned about the IRS guidance released so far, which is focused mainly on individuals preparing income tax returns, because it is not clear how the guidance will affect individuals who prepare Form 5500.

Hoffman notes that Form 5500 is primarily an information return for employee benefit plans and that the data collected, for the most part, has little or no impact on an actual tax return. It is critical that support staff that only input data relating to Form 5500 preparation but do not exercise "discretion or independent judgment be excluded from the new registration and the Circular 230 process," Hoffman said. He explains that an overly broad reach of the new registration process will most likely lead to higher retirement plan administration costs that will ultimately be passed on to the participants and to lower retirement benefits.

Recommendations

ASPPA asks the IRS to consider requiring only one person to register as a paid "tax return preparer" for Form 5500 returns. That person should be chiefly responsible for the substantive accuracy of the Form 5500. However, this will only apply if the reported information affects a substantial part of an actual tax return or claim for refund filed by a plan sponsor. ASPPA also recommends that IRS guidance specifically identify which schedules or entries relating to Form 5500 potentially affect an actual tax return and could, therefore, subject a preparer to registration.

Source: ASPPA press release, September 20, 2010.

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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