The purpose of the initiative is to improve taxpayer compliance and service by setting professional standards for and providing support to the tax preparation industry.
The multi-year phase-in effort called for certain paid tax return preparers to pass a competency test and to take annual continuing education courses.
The ethics provisions found in Treasury Department's Circular 230 were extended to all paid tax return preparers.
As a result of a lawsuit, the Court issued an order prohibiting the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers.
[3][4] The IRS failed in its effort to obtain a stay of the ruling, which was then affirmed (upheld) in February 2014 by the U.S. Court of Appeals for the District of Columbia Circuit.
United States Taxpayer Advocate Nina E. Olson, in her 2002 annual report to Congress, suggested legislation to register and regulate paid tax preparers.
The agency found that all 19 tax returns were wrong to some degree and that only two preparers correctly calculated the proper refund amount.
In 2008, the Government Accountability Office (GAO) followed up with a review of how Oregon and California, the only states to regulate tax preparers, addressed the issue.
On June 4, 2009, Commissioner Douglas Shulman announced that the IRS would conduct a thorough review of the issues related to regulating paid tax return preparers.
[6] On January 4, 2010, IRS Commissioner Shulman announced the results of a six-month study that included public hearings with consumer advocates, other government agencies and tax professionals.
The report found that the number of paid tax return preparers was difficult to determine, ranging anywhere from 900,000 to 1.2 million people.
And, more directly, the American public overwhelmingly supports efforts to increase the oversight of paid tax return preparers," the report concluded.
The online PTIN account also could be used to schedule a date and time for the competency test and, eventually, to track continuing education credit hours.
[9] Starting November 2011, the IRS launched a new competency test that, until the program was suspended in 2013, certain preparers were required to take and pass.
Preparers who are Certified Public Accountants (CPAs), attorneys and Enrolled Agents were exempt from this test because they have other exam requirements.
The initiative extended the ethical provisions set out by Treasury's Circular 230 to all paid federal tax return preparers.
In order to implement the Return Preparer Initiative, the IRS and the Treasury Department have issued a series of proposed and final regulations and guidance documents.