In your role as a tax preparer, you want to maintain current and accurate certifications, not only for compliance of your career with governmental regulations but also to preserve your professional standing as a service provider to your clients. We at Drake Software recognize this need for clarity regarding certifications and have compiled a guide to expound upon the topic for your ease. Read on to learn more about current certifications for tax preparers, where to obtain them, navigating the IRS website and other resources, and potential penalties associated with noncompliance.
Preparer Tax Identification Number (PTIN)
The primary certification for tax preparers to maintain is the PTIN. The IRS issues this for any person who receives compensation for their labor in tax preparation.
A PTIN is a personalized nine-digit number that aids the IRS in distinguishing different tax preparers. Using the PTIN, the IRS can monitor a tax professional’s work and ensure compliance with current regulations. Additionally, taxpayers can experience a sense of confidence in their tax preparers as the PTIN is a signal of accountability, transparency, and legitimacy within the industry.
To receive a PTIN, tax preparers must visit the corresponding webpage on the IRS website, which you can find here. You can obtain a PTIN by completing the online application, which the IRS then reviews to verify your identity and confirm compliance with other federal standards. Be sure to have the documentation you need on hand, listed here by the IRS PTIN checklist. You would also need to submit a yearly fee of approximately $30, which you can submit securely online.
The PTIN is of utmost importance for any tax professional, as it allows tax preparers to remain eligible for providing services to clients. Tax preparers must renew this certification each year before 12/31 in order to avoid malpractice as a tax preparer.
Any tax preparer can demonstrate their commitment to professionalism and compliance by proactively renewing their PTIN yearly. Not only does this support your integrity in your field, helping you foster relationships with your clients, but it also negates any potential noncompliance penalties that could arise in the absence of possessing a valid PTIN.
Renewing the PTIN is an annual requirement that tax preparers must complete to remain eligible for providing tax services. Follow the steps outlined above to understand the significance of the PTIN, learn how to obtain the number, and supplement your knowledge of the tax preparation industry requirements.
Finding Certification Information on the IRS Website
The IRS website also houses other information outside of the PTIN in regard to compliant certifications for tax preparers. You can find the IRS page for “Staying Compliant” here, which lists out other facets of maintaining certifications. We have recounted some of these certifications below to help provide an overview. In addition, we recommend regularly checking the IRS website for a more comprehensive index, as well as for any updated certification information as compliance is essential for any tax preparer.
One example of another certification the IRS promotes is the Centralized Authorization File (CAF). Separate from the PTIN, the CAF is a nine-digit identification number that enables tax professionals to access client information. This number is assigned the first time a preparer files a third-party authorization with the IRS and is intended to be used on any following authorizations.
Another required certification from the IRS is Continuing Professional Education (CPE). Since ongoing training and learning is an inevitable facet of work as a tax preparer, the IRS has set forth certain regulations about maintaining education for professionals. One must obtain continuing education credits from an IRS-approved provider, and we offer a multitude of approved courses at Drake Software. You can read more in-depth about CPE requirements from our blog here or take a look at our wide range of learning resources here.
Finally, if you’re working as a tax preparer with a business, you’ll need to obtain a Federal Tax Identification Number, also known as an Employer ID Number (EIN). Find out if you need this identifier, how to apply, the timeline for requesting an EIN, and event canceling an EIN here on the IRS website.
Additional Resources for Maintaining Certifications
Beyond the IRS, there are additional resources that can aid in supporting current certifications for tax preparers.
Business coalitions such as the National Association of Tax Professionals (NATP), the National Society of Accountants (NSA), the American Institute of Certified Public Accountants (AICPA), and the National Association of Enrolled Agents (NAEA) offer continuing education, courses, and conferences that are designed to supplement tax professionals’ adeptness and mastery of their profession. By engaging in networking opportunities and participating in educational offerings, you can stay up to date on any regulatory changes in the field and learn the industry’s best practices in regard to certifications.
Likewise, state tax agencies provide complementary information on required certifications for tax preparers. Each state maintains specific regulations, so it's recommended that professionals consult the state’s website directly for the most accurate information. to consult the respective state tax agency's website or contact their office directly.
At Drake Software, we also prioritize your knowledge of certifications, offer seminars and webinars, and attend various trade shows across the nation to help make this information accessible to our clients. By cross-referencing all these resources alongside the IRS recommendations for certifications, tax preparers can feel confident in garnering an exhaustive understanding of operating in compliance with certification regulations.
Penalties for Not Maintaining Certifications
In addition to potential harm to your reputation as a tax professional, noncompliance with mandatory certifications can result in cumbersome penalties. The IRS may respond to a lack of compliance by imposing restrictions or pursuing legal action against the noncompliant preparer.
One major penalty a tax preparer may encounter in the event of noncompliance is having their PTIN revoked by the IRS. This may occur in response to a preparer’s failure to renew their PTIN, or if the preparer engages in conduct that is not aligned with the IRS’ ethical guidelines. The implication of a revoked PTIN is that professional would no longer be able to legally provide tax preparation services.
Similarly, tax preparers can be subject to monetary penalties if they do not maintain certification requirements. Depending on the severity of the infraction, the IRS can assess the level of a penalty and charge a fine from the tax professional or even impose monetary sanctions. In addition to creating a financial burden, these occurrences can contribute toward a derelict reputation in the industry.
Tax preparers must enlist the trust of clients to accurately and ethically oversee their financial matters. If a tax professional is found to be non-compliant with federally enforced certifications, that trust is eroded and tarnished. Your success in the tax preparation industry requires maintaining certifications in compliance with the IRS.
Since failure to ensure compliance with certifications may result in penalties and potential harm, for tax preparers, maintaining current certifications is crucial. Preserving certain identification factors and seeking information is a proactive and effective method to ensure that you never find yourself inadvertently out of compliance with the IRS and potentially at risk.
In sum, upholding compliance with current certification requirements as a tax preparer is necessary for the efficacy and functioning of your work as a tax professional. You can keep relevant records of current certifications with the IRS, professional associations, tax agencies, and Drake Software. In pursuing current certifications, tax preparers can avoid noncompliance penalties, demonstrate their trustworthiness to clients, and maintain their professional standing in the industry.