IRS regulations in force
For years, anyone who wanted to prepare taxes could simply hang out a shingle and start filling out tax returns for a fee. Such operations include accountants, mom-and-pop tax preparation firms, and storefronts that pop up in January and close in April.
While a few states have regulated tax preparers, there was no federal oversight in place.
In 2011, the IRS instituted a system to track every person who is paid to prepare and file returns and make sure they have at least a basic level of tax competence. Under the IRS proposal, attorneys, CPAs and enrolled agents would be exempt from a tax competency testing requirement because these professionals already must meet continuing education standards set by their licensing organizations.
The IRS is still issuing each tax preparer an identification number, or PTIN, but its plan to require most independent tax preparers to pass a competency exam is on hold.
The stay on testing is the result of a federal lawsuit opposing the plan brought by three independent tax preparers. The IRS lost the first legal round in January 2012. The agency is awaiting a ruling on its appeal.
In the meantime, be sure to ask any potential tax preparer for references and assurances that the office will be open after your return is filed in case you or the IRS have follow-up questions.