Reg-134235-08

Part IV. Items of General Interest
Notice of Proposed
Rulemaking
Furnishing Identifying Number
of Tax Return Preparer
REG–134235–08
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains proposed regulations under section 6109 of
the Internal Revenue Code (Code) that
provide guidance to tax return preparers
on furnishing an identifying number on
tax returns and claims for refund of tax
that they prepare. These proposed regulations provide guidance on the identifying
number of a tax return preparer for tax
returns and claims for refund filed before
and after the proposed effective date. The
proposed regulations describe how the IRS
will define the identifying number of tax
return preparers. Additional provisions
of the proposed regulations provide that
tax return preparers must apply for and
regularly renew their preparer identifying
number as the IRS may prescribe in forms,
instructions, or other guidance. This document also invites comments from the
public regarding these proposed regulations.
DATES: Written or electronic comments
and requests for a public hearing must be
received by April 26, 2010.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–134235–08), room
5205, Internal Revenue Service, P.O. Box
7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:PR (REG–134235–08),
Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW,
Washington, DC 20224, or sent electronically via the Federal eRulemaking
Portal at www.regulations.gov (IRS —
REG–134235–08).

2010–16 I.R.B.

FOR
FURTHER
INFORMATION
CONTACT: Concerning the proposed
regulations, Stuart Murray at (202)
622–4940 (not a toll-free number); concerning submissions of comments and
requests for a hearing, Richard Hurst at
[email protected].
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Management and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the
collection of information should be sent to
the Office of Management and Budget,
Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC
20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on
the collection of information should be
received by April 26, 2010.
Comments are specifically requested
concerning:
Whether the proposed collection of information is necessary for the proper performance of the functions of the IRS, including whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information;
How the quality, utility, and clarity of
the information to be collected may be enhanced;
How the burden of complying with the
proposed collections of information may
be minimized, including through the application of automated collection techniques
or other forms of information technology;
and
Estimates of capital or start-up costs of
operation, maintenance, and purchase of
service to provide information.
The collection of information in these
proposed regulations is in §1.6109–2(d)
and (e). This information is required in order for the IRS to issue identifying numbers to tax return preparers who are eligi-

596

ble to receive them. Tax return preparers
will need to apply for an identifying number as prescribed in forms, instructions, or
other guidance. The use of a prescribed
identifying number by tax return preparers on tax returns and claims for refund
of tax will enable the IRS to accurately
identify tax return preparers, to match tax
return preparers to tax returns and claims
for refund that they prepare, and to generally administer the internal revenue laws.
The collection of information is mandatory. The likely respondents are tax return
preparers and employers of tax return preparers.
Estimated total annual reporting burden: 300,000 hours.
Estimated average annual burden hours
(or fraction of an hour) per respondent:
varies from 10 to 20 minutes, with an estimated average of 15 minutes.
Estimated number of respondents: 1.2
million.
Estimated annual frequency of responses: once every three years.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
control number assigned by the Office of
Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
This document contains proposed
amendments to regulations under section
6109 of the Code relating to furnishing a
tax return preparer’s identifying number
on tax returns and claims for refund of tax.
Section 6109 was added to the Code in
1961 (Public Law 87–397, 75 Stat. 828)
and authorizes the Secretary to prescribe
regulations for the inclusion of identifying numbers on a return, statement, or
other document required to be filed with
the IRS. In addition, section 6109(c) authorizes the Secretary “to require such
information as may be necessary to assign
an identifying number to any person.”

April 19, 2010

Section 6109(a)(4) as originally enacted
by section 1203(d) of the Tax Reform
Act of 1976 (Public Law 94–455, 90 Stat.
1520) required return preparers to furnish
on income tax returns and claims for refund of income tax an identifying number,
as prescribed, to identify the preparer,
the preparer’s employer, or both. Section
8246(a)(2)(D)(i) of the Small Business
and Work Opportunity Tax Act of 2007
(Public Law 110–28, 121 Stat. 112),
amended section 6109(a)(4) to allow
the IRS to prescribe that tax return
preparers furnish identifying numbers
on any tax returns or claims for refund
they prepare. As currently prescribed in
regulations, the identifying number of a
tax return preparer who is an individual
is the preparer’s social security number
(SSN) or alternative number as prescribed
by the IRS. The proposed regulations
provide that the identifying number of
a tax return preparer is exclusively the
number prescribed by the IRS. The
proposed regulations will implement
some of the recommendations made
in Publication 4832, Return Preparer
Review (Rev.
12–2009), published
at the end of last year (the Report).
The IRS and the Treasury Department
believe that the implementation of the
Report’s recommendations, including the
recommendations implemented by these
regulations, will increase tax compliance
and allow taxpayers to be confident that
the tax return preparers to whom they turn
for assistance are knowledgeable, skilled,
and ethical.
1. Identifying Numbers Generally
Because an identifying number is
unique to the person to whom assigned, the
IRS is able to use the number to correctly
identify the taxpayer or the tax return
preparer. The use of identifying numbers
allows the IRS to accurately and timely
process returns and issue refunds, centralize information, post information to the
correct taxpayer’s account, and effectively
administer the rules relating to tax return
preparers.
2. Requiring Identifying Numbers from
Tax Return Preparers

ically, under §1.6695–1(b), a signing
tax return preparer, as defined under
§301.7701–15(b)(1), must sign a return
of tax or claim for refund after it is completed and before it is presented to the
taxpayer for signature. A signing tax return preparer under §301.7701–15(b)(1)
is a tax return preparer who has primary
responsibility for the overall substantive
accuracy of the preparation of a return of
tax or claim for refund.
Under §1.6109–2(a)(1), a tax return
preparer who must sign a tax return or tax
refund claim must also include an identifying number with the preparer’s signature.
A return of tax includes an information
return described in §301.7701–15(b)(4).
If a signing tax return preparer has an employment arrangement or association with
another person, then that other person’s
employer identification number (EIN)
must also be included on the tax return or
refund claim.
The identifying number of a signing
tax return preparer, and the identifying
number of any person with whom the
preparer has an employment arrangement
or association, must be included on electronically filed tax returns, as well as
paper returns. Further, because of recent
statutory changes, tax return preparers
who prepare and file individual income
tax returns (Form Series 1040) for their
clients will soon be required to electronically file the returns, unless the tax return
preparer reasonably expects to file only
10 or fewer individual income tax returns
for the calendar year. See Section 17 of
the Worker, Homeownership, and Business Assistance Act of 2009, Public Law
111–92, 123 Stat. 2984, 2997 (adding
Code section 6011(e)(3)).
Tax return preparers who are required
but fail to include their identifying number
on a tax return or refund claim, or fail to
include the identifying number of any person with whom they have an employment
arrangement or association, are subject to
a penalty under section 6695(c). A tax return preparer is not liable for the penalty if
the failure to include an identifying number is due to reasonable cause and not due
to willful neglect.
3. Preparer Tax Identification Numbers

Tax return preparers generally must
provide an identifying number on the tax
returns they prepare and sign. Specif-

April 19, 2010

Section 6109(a) initially provided that
the identifying number of a tax return pre-

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parer was the individual’s SSN. Section
3710(a) of the IRS Restructuring and Reform Act of 1998 (Public Law 105–206,
112 Stat. 685) (RRA ’98), allowed the IRS
to prescribe an identifying number for tax
return preparers other than the preparer’s
SSN. In response to section 3710(a) of
RRA ’98, the IRS developed and began to
issue preparer tax identification numbers
(PTINs). Tax return preparers currently
may apply online for a PTIN using the
e-services PTIN process on the IRS website at www.irs.gov or by filing Form
W–7P, “Application for Preparer Tax
Identification Number.” Applying online
is faster, and return preparers are encouraged to apply online. In the future, the IRS
will prescribe the method to apply for a
PTIN consistent with these proposed regulations. Currently, under §1.6109–2(a)(2),
a tax return preparer may use as an identifying number on a tax return or claim
for refund either the preparer’s SSN or
an “alternative number” prescribed by the
IRS, including a PTIN. But an EIN, an
Electronic Filing Identification Number
(EFIN) (which is an identification number assigned to IRS e-file providers), or
an Electronic Transmitter Identification
Number (ETIN) (which is an identification
number assigned to IRS e-file providers
who electronically transmit tax returns to
the IRS) is not a valid preparer identifying
number.
4. Regulation of Tax Return Preparers
In June 2009, the IRS initiated a comprehensive review of tax return preparers,
and in December 2009 the IRS published
the Report describing its findings from that
review. The Report recommended, in part,
that tax return preparers be required to obtain and use a PTIN as the exclusive preparer identifying number and undergo a
tax-compliance check. As discussed below, the proposed regulations implement
those recommendations.
Under current law, any individual may
prepare a tax return or claim for refund.
The Report recommended that the IRS establish new eligibility standards that an
individual must meet in order to prepare
tax returns — including testing, continuing education, and tax compliance checks.
The Report contemplates that only attorneys, certified public accountants, enrolled
agents, as well as tax return preparers who

2010–16 I.R.B.

pass a minimum competency exam and
meet other requirements (referred to as
“registered tax return preparers”) will be
eligible to prepare and sign tax returns and
claims for refund. These proposed regulations do not establish the requirements
to become a registered tax return preparer,
which primarily will be set forth in future
guidance under Treasury Department Circular No. 230, 31 CFR Part 10. After a
transition period, however, it is intended
that only individuals who satisfy the eligibility standards may obtain and use a PTIN
as a tax return preparer.
Explanation of Provisions
1. Requiring the Use of PTINs
The proposed regulations provide that
for tax returns or refund claims filed after
December 31, 2010, the identifying number that a tax return preparer must include
with the preparer’s signature on tax returns and refund claims is that prescribed
by the IRS in forms, instructions, or other
guidance. Tax return preparers will not be
able to use an SSN as a preparer identifying number unless specifically prescribed
by the IRS in forms, instructions, or other
guidance. Instead, to the extent provided
in forms and instructions, a tax return preparer will be required to use a PTIN as
the identifying number unless the IRS prescribes in the future a replacement to the
PTIN. Forms and instructions will be revised accordingly. The use of PTINs as the
identifying number for tax return preparers will improve tax administration and tax
compliance, benefit taxpayers and tax return preparers, and help maintain the confidentiality of SSNs.
For tax returns or claims for refund filed
before January 1, 2011, the identifying
number of a tax return preparer will remain
the preparer’s SSN or PTIN. In the case of
tax returns for taxable periods ending before January 1, 2011, and made on the appropriate forms prescribed for the taxable
periods, but which are filed on or after January 1, 2011, tax return preparers must furnish on the returns the identifying number
prescribed on the forms to be filed and in
associated instructions.
For tax return preparation businesses
and other persons having an employment
arrangement or association with a tax return preparer, the business’s or employer’s

2010–16 I.R.B.

EIN continues to be the identifying number that must be included on tax returns
and refund claims along with the tax return
preparer’s signature and preparer identifying number. An individual tax return preparer, however, may not use an EIN as a
preparer identifying number on a return,
even if the preparer has an EIN (for example, as a sole proprietor). Tax return
preparers who use their SSN, or an EIN,
EFIN, or ETIN, instead of a valid PTIN,
on tax returns or claims for refund filed after the effective date may be subject to the
penalty under section 6695(c) unless the
failure to include a valid PTIN is due to
reasonable cause and not due to willful neglect.
2. Eligibility to Receive a PTIN
The proposed regulations provide that
all tax return preparers must apply for a
PTIN or other prescribed identifying number at the time and in the manner as may
be prescribed by the IRS in forms, instructions, or other appropriate guidance. The
proposed regulations also authorize the
IRS to prescribe a user fee in connection
with applying for, and renewing, a PTIN
(or successor number similar to a PTIN).
Except as provided in any transitional period, beginning after December 31, 2010,
to obtain a PTIN, an individual must be
an attorney, certified public accountant,
enrolled agent, or registered tax return
preparer under future guidance to be
provided in Circular 230.
Only for purposes of applying for and
renewing a PTIN or other prescribed preparer identifying number, the term tax return preparer means any individual who
is compensated for preparing, or assisting
in the preparation of, all or substantially
all, of a tax return or claim for refund of
tax. A tax return preparer does not include an individual who is not otherwise a
tax return preparer as that term is defined
in §301.7701–15(b)(2), or who is an individual described in §301.7701–15(f). The
proposed regulations provide several examples illustrating who is a tax return preparer required to apply for a PTIN.
As part of the process of applying for a
PTIN, a tax return preparer may be subject
to both an initial tax-compliance check and
subsequent periodic checks, which could
include a review of a preparer’s history of
compliance with personal and business tax

598

filing and payment obligations. The taxcompliance check is intended to establish
whether a tax return preparer has timely
filed required personal and business tax returns and has paid taxes that are due or
made other acceptable arrangements with
the IRS, such as an approved installment
agreement under section 6159. If a tax return preparer disregards any applicable requirements to obtain a prescribed identifying number and thereafter omits, when required to include, a valid identifying number on a tax return or claim for refund filed
after the effective date, the preparer may
be liable for the section 6695(c) penalty,
unless the failure to include a valid identifying number was due to reasonable cause
and not due to willful neglect.
The information a tax return preparer
provides when the preparer initially applies for a PTIN or other prescribed identifying number will often become outdated
or otherwise inaccurate. The IRS may require tax return preparers to regularly renew their identifying numbers and otherwise maintain updated information with
the IRS. If a tax return preparer who is required to include an identifying number on
a tax return or claim for refund filed after
the effective date uses an expired identifying number, the tax return preparer may be
liable for the section 6695(c) penalty, unless the use of the expired number was due
to reasonable cause and not due to willful
neglect.
The proposed regulations provide that
if necessary for effective tax administration, the IRS may prescribe exceptions to
any of the requirements, such as for an interim period while procedures are being
implemented. For example, the IRS and
the Treasury Department recognize that
the procedures for becoming a registered
tax return preparer may not be fully implemented when these regulations become effective. It is anticipated that transitional
interim guidance will be provided to allow individuals who intend to become registered tax return preparers to obtain an
interim PTIN or other interim identifying
number that may be used as a preparer
identifying number on tax returns and refund claims until the procedures are fully
implemented. After the interim period,
however, to obtain a PTIN, an individual
will need to be an attorney, certified public
accountant, enrolled agent, or registered

April 19, 2010

tax return preparer authorized to practice
before the IRS under Circular 230.

Description of the reasons why the agency
action is being considered.

Statement of the objectives of, and the
legal basis for, the proposed rule.

Proposed Effective/Applicability Date

Taxpayers’ reliance on paid tax return
preparers has grown steadily in recent
decades. Today, paid tax return preparers
assist a majority of U.S. taxpayers in meeting their income tax filing obligations.
Beyond preparing tax returns, tax return
preparers also help educate taxpayers
about the tax laws, and facilitate electronic
filing. Tax return preparers provide advice
to taxpayers, identify items or issues for
which the law or guidance is unclear, and
inform taxpayers of the benefits and risks
of positions taken on a tax return, and the
tax treatment or reporting of items and
transactions. Competent tax return preparers who are well educated in the rules and
subject matter of their field can prevent
costly errors, potentially saving a taxpayer
from unwanted problems later on and relieving the IRS from expending valuable
examination and collection resources.
Given the important role that tax return
preparers play in Federal tax administration, the IRS has a significant interest in
being able to accurately identify tax return preparers and monitor their tax return
preparation activities. The proposed regulations are intended to advance tax administration by requiring all individuals who
are paid to prepare all or substantially all
of a tax return or claim for refund of tax to
obtain a preparer identifying number prescribed by the IRS. Pursuant to the proposed regulations, the IRS will require individuals who sign tax returns or claims for
refund to report the preparer’s identifying
number on a tax return or claim for refund
when the return or refund claim is signed.
The proposed regulations also provide that
the IRS may require tax return preparers to
apply for, and regularly renew, their identifying numbers. Under the proposed regulations, the IRS may prescribe a user fee
payable when applying for a number and
for renewal.
Further, the IRS and the Treasury Department conclude that taxpayers, tax return preparers, and overall tax administration will be best served through increased
oversight of the tax return preparer industry. Mandating a single prescribed identifying number for all tax return preparers
and assigning a prescribed number to registered tax return preparers is critical to effective oversight.

The principal objective of the proposed
regulations is to enable the IRS to more accurately identify tax return preparers and
the tax returns and refund claims associated with each tax return preparer. The
proposed regulations do this by providing that the IRS may prescribe the use of
identifying numbers for tax return preparers and the qualifications or other requirements necessary to obtain a valid number.
The legal basis for these provisions is section 6109 of the Code, which authorizes
the Secretary to prescribe the “identifying
number for securing proper identification
of” a tax return preparer and “to require
such information as may be necessary to
assign an identifying number to any person.”

These regulations are effective after the
date that final regulations are published in
the Federal Register.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory assessment is not required. It has also been
determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations.
It has been determined that an initial regulatory flexibility analysis under
5 U.S.C. 603 is required for this notice
of proposed rulemaking. The analysis is
set forth below under the heading, “Initial
Regulatory Flexibility Analysis.”
Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking has
been submitted to the Chief Counsel for
Advocacy of the Small Business Administration for comment on its impact on small
business.
Initial Regulatory Flexibility Analysis
When an agency issues a rulemaking proposal, the Regulatory Flexibility
Act (5 U.S.C. chapter 6) requires the
agency to “prepare and make available
for public comment an initial regulatory
flexibility analysis” that “describe[s] the
impact of the proposed rule on small
entities.” 5 U.S.C. 603(a). Section 605
of the Act provides an exception to
this requirement if the agency certifies
that the proposed rulemaking will not
have a significant economic impact on a
substantial number of small entities. A
small entity is defined as a small business,
small nonprofit organization, or small
governmental jurisdiction.
5 U.S.C.
601(3)-(6). The IRS and the Treasury
Department conclude that the proposed
regulations, if promulgated (together with
other contemplated guidance provided
for in these regulations), will impact a
substantial number of small entities and
the economic impact will be significant.
As a result, an initial regulatory flexibility
analysis is required.

April 19, 2010

599

Description and estimate (where feasible)
of the number of small entities subject to
the proposed rule.
The proposed regulations apply to individuals who prepare tax returns and claims
for refund of tax. The estimated number of
paid tax return preparers is as high as 1.2
million, which means the proposed regulations are likely to impact a large number
of individuals. Most paid tax return preparers are employed by firms. A substantial number of paid tax return preparers are
employed at small tax return preparation
firms or are self-employed tax return preparers. Any economic impact of these regulations on small entities generally will be
on self-employed tax return preparers who
prepare and sign tax returns or on small
businesses that employ one or more individuals who sign tax returns.
The appropriate NAICS codes for
tax return preparers are those for tax return preparation services (NAICS code
541213) and other accounting services
(NAICS code 541219). Entities identified
under either of these two codes are considered small under the Small Business
Administration’s size standards (13 CFR
121.201), if their annual revenue is less
than $7 million or $8.5 million, respectively. The IRS estimates that approximately 70 to 80 percent of the individuals
subject to these proposed regulations are
tax return preparers operating as or employed by small entities.

2010–16 I.R.B.

Description of the projected reporting,
recordkeeping, and related requirements
of the proposed rule, including an estimate
of the classes of small entities that will
be subject to the requirements and the
type of professional skills necessary for
preparation of the report or record.
The proposed regulations do not directly impose any reporting, recordkeeping, or similar requirements on any small
entities. Rather, the proposed regulations provide that the IRS may prescribe
in forms, instructions, or other guidance
(including regulations) requirements for
identifying numbers for tax return preparers, regular renewal of identifying
numbers, and payment of a user fee when
applying for or renewing an identifying
number. In addition, other guidance may
require certain tax return preparers to
complete competency testing, complete
continuing education courses, and adhere
to established rules of practice governing
attorneys, certified public accountants,
enrolled agents, enrolled actuaries, and
enrolled retirement plan agents.
Applying for an identifying number and
subsequent renewal will require reporting
of certain information, but are not expected
to require recordkeeping. These activities also will not require the purchase or
use of any special business equipment or
software. To the extent it will be necessary to apply for a PTIN (or similar identifying number that replaces a PTIN) online at www.irs.gov, most if not all tax return preparation businesses have computers and Internet access. The IRS estimates
that applying for a PTIN will take 10 to 20
minutes per individual, with an average of
15 minutes per individual.
Under other guidance that the IRS may
issue, tax return preparers who apply to
be registered tax return preparers and who
regularly renew their status may be subject
to recordkeeping requirements because
they may be required to maintain specified
records, such as documentation and educational materials relating to completion
of continuing education courses. These
requirements do not involve any specific professional skills other than general
recordkeeping abilities already needed to
own and operate a small business or to
competently act as a tax return preparer. It
is estimated that tax return preparers will
annually spend approximately 30 minutes

2010–16 I.R.B.

to 1 hour in maintaining records relating
to the continuing education requirements,
depending on individual circumstances.
A separate regulation addressing reasonable user fees will be proposed in the
near future. Tax return preparers may be
required to pay a user fee when first applying for a PTIN and at every renewal. Small
entities may be affected by these costs if
the entities choose to pay some or all of
these fees for their employees.
Under regulations to be issued in the
future, tax return preparers may also incur costs for commercial continuing education courses and minimum competency
examinations, plus incidental costs, such
as for travel and accommodations in order
to maintain their status as registered tax return preparers under Circular 230. Course
prices can vary greatly, from free to hundreds of dollars. Many small tax return
preparation firms may choose, as with the
user fee, to bear these costs for their employees. In some cases, small entities may
lose sales and profits while their employed
tax return preparers attend training or educational classes or are studying and sitting for examinations. Some small entities
that employ tax return preparers may even
need to alter their business operations if a
significant number of their employees cannot satisfy the necessary registration and
competency requirements. The IRS and
the Treasury Department conclude, however, that only a small percentage of small
entities, if any, may need to cease doing
business or radically change their business
model due to the proposed regulations.
Although each of the reporting and
recordkeeping requirements and the costs
identified above (in connection with the
proposed regulations and the other anticipated guidance necessary to implement the
Return Preparer Review) is not expected
to singly result in a significant economic
impact, taken together it is anticipated
that they may have a significant economic
impact on a substantial number of small
entities.
Identification, to the extent practicable,
of all relevant Federal rules that may
duplicate, overlap, or conflict with the
proposed rule.
The proposed regulations do not duplicate, overlap, or conflict with any Federal
statutes or other rules.

600

Description of any significant alternatives
to the proposed rule that accomplish the
stated objectives of applicable statutes
and minimize any significant economic
impact on small entities.
The IRS and the Treasury Department
have determined that there are no viable alternatives to the proposed regulations that
would enable the IRS to accurately identify tax return preparers, other than through
the use of a prescribed identifying number,
as provided in the proposed regulations.
More broadly, the IRS received a large
volume of comments as part of the Return
Preparer Review on the issue of increased
oversight of tax return preparers generally
and on the Report’s proposed recommendations, including requiring tax return preparers to use a uniform prescribed identifying number. The comments were received
from all categories of interested stakeholders, including tax professional groups representing large and small entities, IRS advisory groups, tax return preparers, and
the public. The input received from this
large and diverse community overwhelmingly expressed support for the proposed
requirements.
As to the proposed requirements recommended in the Report, the IRS and the
Treasury Department considered various
alternatives in determining the best ways
to effectuate proposed changes with respect to tax return preparers, including:
(1) Requiring all paid tax return preparers to comply with the ethical standards in
Circular 230 or an ethics code similar to
Circular 230, but not requiring any paid
preparers to demonstrate their qualification and competency;
(2) Requiring tax return preparers who
are not currently authorized to practice before the IRS to register with the IRS, complete annual continuing education requirements, and meet certain ethical standards,
but not to pass a minimum competency examination;
(3) Requiring all paid tax return preparers to pass a minimum competency examination and meet other registration requirements; and
(4) Requiring all paid tax return preparers who are not currently authorized to
practice before the IRS to pass a minimum
competency examination and meet other
registration requirements, but “grandfather
in” tax return preparers who have accu-

April 19, 2010

rately and competently prepared tax returns for a certain period of years.
After consideration of these and other
alternatives and the responses received in
the public comment process, the IRS and
the Treasury Department conclude that the
provisions of the proposed regulations will
most effectively promote sound tax administration. The provisions in the proposed
regulations for a single prescribed identifying number for tax return preparers will
enable the IRS to accurately identify tax
return preparers, match preparers with the
tax returns and claims for refund they prepare, and better administer the tax laws
with respect to tax return preparers and
their clients. The provisions, in combination with anticipated guidance described
above, also will ensure that qualified, competent, and ethical tax return preparers will
be assigned prescribed preparer identifying numbers. The testing requirements
that may be set forth in other guidance
will establish a benchmark of minimum
competency necessary for tax return preparers to obtain their professional credentials, while the continuing education requirements are intended to ensure that tax
return preparers remain current on the Federal tax laws and continue to develop their
tax knowledge. The extension in other,
prospective guidance of the rules in Circular 230 to any paid tax return preparer will
require all practitioners to meet certain ethical standards and allow the IRS to suspend
or otherwise appropriately discipline tax
return preparers who engage in unethical
or disreputable conduct. Accordingly, the
implementation of qualification and competency standards is expected to increase
tax compliance and allow taxpayers to be
confident that the tax return preparers to
whom they turn for assistance are knowledgeable, skilled, and ethical.
Comments and Requests for Public
Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written comments
(a signed original and eight (8) copies)
or electronic comments that are submitted
timely to the IRS. The IRS and the Treasury Department request comments on the
clarity of the proposed rules and how they
can be made easier to understand. All
comments that are submitted by the public

April 19, 2010

will be available for public inspection and
copying. A public hearing will be scheduled if requested in writing by any person
who timely submits comments. If a public hearing is scheduled, notice of the date,
time, and place for the public hearing will
be published in the Federal Register.
Drafting Information
The principal author of these proposed
regulations is Stuart Murray of the Office
of the Associate Chief Counsel, Procedure
and Administration.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 1 is proposed
to be amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation for
part 1 continues to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6109–2 also issued under
26 U.S.C. 6109(a) * * *
Par. 2. Section 1.6109–2 is amended
by revising the section heading, revising
paragraphs (a)(2) and (d), and adding paragraphs (e), (f), (g), (h), and (i) to read as
follows:
§1.6109–2 Tax return preparers furnishing
identifying numbers for returns or claims
for refund and related requirements.
(a) * * *
(2)(i) For tax returns or claims for refund filed on or before December 31, 2010,
the identifying number of an individual tax
return preparer is that individual’s social
security number or such alternative number as may be prescribed by the Internal
Revenue Service in forms, instructions, or
other appropriate guidance.
(ii) For tax returns or claims for refund filed after December 31, 2010, the
identifying number of a tax return preparer
is the individual’s preparer tax identification number or such other number prescribed by the Internal Revenue Service
in forms, instructions, or other appropriate
guidance.
*****

601

(d) Beginning after December 31, 2010,
all tax return preparers must have a preparer tax identification number or other
prescribed identifying number that was applied for and received at the time and in the
manner, including the payment of a user
fee, as may be prescribed by the Internal
Revenue Service in forms, instructions, or
other appropriate guidance. Except as provided in paragraph (h) of this section, beginning after December 31, 2010, to obtain a preparer tax identification number or
other prescribed identifying number, a tax
return preparer must be an attorney, certified public accountant, enrolled agent, or
registered tax return preparer authorized to
practice before the Internal Revenue Service under 31 U.S.C. 330 and the regulations thereunder.
(e) The Internal Revenue Service may
designate an expiration date for any preparer tax identification number or other
prescribed identifying number and may
further prescribe the time and manner
for renewing a preparer tax identification
number or other prescribed identifying
number, including the payment of a user
fee, as set forth in forms, instructions, or
other appropriate guidance. The Internal
Revenue Service may provide that any
identifying number issued by the Internal
Revenue Service prior to the effective date
of this regulation will expire on December 31, 2010, unless properly renewed as
set forth in forms, instructions, or other
appropriate guidance, including these regulations.
(f) As may be prescribed in forms, instructions, or other appropriate guidance,
the IRS may conduct a tax compliance
check on a tax return preparer who applies for or renews a preparer tax identification number or other prescribed identifying number.
(g) Only for purposes of paragraphs (d),
(e), and (f) of this section, the term tax return preparer means any individual who
is compensated for preparing, or assisting
in the preparation of, all or substantially
all of a tax return or claim for refund of
tax. Factors to consider in determining
whether an individual is a tax return preparer under this paragraph (g) include, but
are not limited to, the complexity of the
work performed by the individual relative
to the overall complexity of the tax return
or claim for refund of tax; the amount of
the items of income, deductions, or losses

2010–16 I.R.B.

attributable to the work performed by the
individual relative to the total amount of
income, deductions, or losses required to
be correctly reported on the tax return or
claim for refund of tax; and the amount of
tax or credit attributable to the work performed by the individual relative to the total tax liability required to be correctly reported on the tax return or claim for refund
of tax. A tax return preparer does not include an individual who is not otherwise a
tax return preparer as that term is defined
in §301.7701–15(b)(2), or who is an individual described in §301.7701–15(f). The
provisions of this paragraph (g) are illustrated by the following examples:
Example 1. Employee A, an individual employed
by Tax Return Preparer B, assists Tax Return Preparer
B in answering telephone calls, making copies, inputting client tax information gathered by B into the
data fields of tax preparation software on a computer,
and using the computer to file electronic returns of tax
prepared by B. Although Employee A must exercise
judgment regarding which data fields in the tax preparation software to use, A does not exercise any discretion or independent judgment as to the clients’ underlying tax positions. Employee A, therefore, merely
provides clerical assistance or incidental services and
is not a tax return preparer required to apply for a
PTIN or other identifying number as the Internal Revenue Service may prescribe in forms, instructions, or
other appropriate guidance.
Example 2. The facts are the same as in Example 1, except that Employee A also interviews B’s
clients and obtains from them information needed for
the preparation of tax returns. Employee A determines the amount and character of entries on the returns and whether the information provided is sufficient for purposes of preparing the returns. For at
least some of B’s clients, A obtains information and
makes determinations that constitute all or substantially all of the tax return. Employee A is a tax return
preparer required to apply for a PTIN or other identifying number as the Internal Revenue Service may
prescribe in forms, instructions, or other appropriate
guidance. Employee A is a tax return preparer even
if Employee A relies on tax preparation software to
prepare the return.
Example 3. C is an employee of a firm that
prepares tax returns and claims for refund of tax
for compensation. C is responsible for preparing a
Form 1040, “U.S. Individual Income Tax Return,”
for a client. C obtains the information necessary
for completing the return during a meeting with the
client, and makes determinations with respect to the
proper application of the tax laws to the information
in order to determine the client’s tax liability. C
completes the tax return and sends the completed
return to employee D, who reviews the return for
accuracy before signing it. Both C and D are tax
return preparers required to apply for a PTIN or
other identifying number as the Internal Revenue
Service may prescribe in forms, instructions, or other
appropriate guidance.
Example 4. E is an employee at a firm which prepares tax returns and claims for refund of tax for com-

2010–16 I.R.B.

pensation. The firm is engaged by a corporation to
prepare its Federal income tax return on Form 1120,
“U.S. Corporation Income Tax Return.” Among the
documentation that the corporation provides to E in
connection with the preparation of the tax return is
documentation relating to the corporation’s potential
eligibility to claim a recently enacted tax credit for the
taxable year. In preparing the return, and specifically
for purposes of the new tax credit, E (with the corporation’s consent) obtains advice from F, a subject
matter expert on this and similar credits. F advises
E as to the corporation’s entitlement to the credit and
provides his calculation of the amount of the credit.
Based on this advice from F, E prepares the corporation’s Form 1120 claiming the tax credit in the amount
recommended by F. The additional credit is one of
many tax credits and deductions claimed on the tax
return, and determining the credit amount does not
constitute preparation of all or substantially all of the
corporation’s tax return under this paragraph (g). F
will not be considered to have prepared all or substantially all of the corporation’s tax return, and F is not
a tax return preparer required to apply for a PTIN or
other identifying number as the Internal Revenue Service may prescribe in forms, instructions, or other appropriate guidance. The analysis is the same whether
or not the tax credit is a substantial portion of the return under §301.7701–15 of this chapter, and whether
or not F is in the same firm with E. E is a tax return
preparer required to apply for a PTIN or other identifying number as the Internal Revenue Service may
prescribe in forms, instructions, or other appropriate
guidance.

(h) The Internal Revenue Service,
through forms, instructions, or other appropriate guidance, may prescribe exceptions to the requirements of this section,
including the requirement that an individual be authorized to practice before the
Internal Revenue Service before receiving
a preparer tax identification number or
other prescribed identifying number, as
necessary in the interest of effective tax
administration.
(i) Effective/applicability date. Paragraph (a)(2) of this section is effective for
returns and claims for refund filed after
the date that final regulations are published
in the Federal Register. Paragraphs (d)
through (h) of this section are effective after the date that final regulations are published in the Federal Register.
Steven T. Miller,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on March 24,
2010, 11:15 a.m., and published in the issue of the Federal
Register for March 26, 2010, 75 F.R. 1439)

602

Announcement Regarding
Implementation of FATCA and
Request for Comments
Announcement 2010–22
On March 18, 2010, the Hiring Incentives to Restore Employment (HIRE) Act
of 2010, Pub. L. 111–147 (H.R. 2847) was
enacted into law. Subtitle A of Title V of
the HIRE Act (Subtitle A) made a number
of changes to the tax law to improve tax
compliance with respect to foreign accounts and cross-border transactions and
authorized the Secretary to promulgate
guidance to implement these changes.
The Treasury Department and the
IRS request comments from the public
regarding guidance projects and issues
concerning the interpretation and implementation of Subtitle A. Send submissions
to: CC:PA:LPD:PR (REG–146097–09),
room 5203, Internal Revenue Service, PO
Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be
hand-delivered Monday through Friday
between the hours of 8 a.m. and 4 p.m.
to: CC:PA:LPD:PR (NOT–112379–10),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue, NW, Washington, DC 20224 or sent electronically
via the Federal eRulemaking Portal at
www.regulations.gov (NOT–112379–10).
The principal author of this announcement is Kathryn T. Holman of the Office of
Associate Chief Counsel (International).
For further information regarding this announcement, contact Kathryn T. Holman
at (202) 622–8556 (not a toll-free call).

Foundations Status of Certain
Organizations
Announcement 2009–23
The following organizations have failed
to establish or have been unable to maintain their status as public charities or as operating foundations. Accordingly, grantors
and contributors may not, after this date,
rely on previous rulings or designations
in the Cumulative List of Organizations
(Publication 78), or on the presumption
arising from the filing of notices under section 508(b) of the Code. This listing does
not indicate that the organizations have lost
their status as organizations described in

April 19, 2010