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. The IRS had planned to first issue each tax preparer an identification number, or PTIN, and then require tax preparers to pass a competency exam. At that point, the tax pro would then be an IRS Registered Tax Return Preparer.
However, on Jan. 18, a federal court ruling put an end, at least temporarily, to the IRS preparer regulation plan. Three tax preparers had filed suit, claiming the IRS did not have statutory authority to impose the regulations. The federal judge in Washington, D.C. hearing the case agreed and issued an injunction barring implementation of the IRS regulations. The IRS is expected to appeal, but for now the Registered Tax Return Preparer designation is on hold.
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.