Costs of IRS Competency Testing and PTIN Registration

In the November 1, 2010 IRS Bulletin the Internal Revenue Service made some estimates as to the cost of the new PTIN (Preparer Tax Identification Number) registration requirements. The IRS also made known that their estimate on the costs of the registered tax return preparer competency examination is still up in the air as vendors to administer the testing have not been selected. However, it is interesting to note that the IRS seems to have settled on the name Registered Tax Return Preparer Competency Examination for the name of the test.

Here’s the breakdown of the estimated costs as of November 1, 2010.

PTIN Registration

Costs to Registered Tax Preparers for user fees associated with registering their PTIN and annual renewals: The basic costs to tax preparers to register for the Preparer Tax Identification Number – PTIN – is $50.00 annually.  The Internal Revenue Service estimates that there are somewhere between 800,000 and 1.2 million tax preparers. It’s easy to do the math; the total costs to Registered Tax Preparers is going to be in the range of $40 to $60 million dollars.

Cost to Third Party PTIN Vendors: We don’t know the cost to the vendors, or their profits, but we do know the third party user fee charged by Accenture is $14.25 which bumps the price of PTIN registration to $64.25.

Cost to the Government: The IRS estimates that the cost to the government will be offset by the $50.00 PTIN registration fee. Get this – the IRS estimates the government will collect at least $59,427,633 to cover the cost the government will incur to administer the program. The costs include:

  1. the costs the government faces in administering registration cards or certificates for each registered tax preparer
  2. the costs associated with prescribing forms, instructions, or other guidance as to which forms and schedules registered tax preparers must complete
  3. tax compliance and suitability checks conducted by the government

The $50 PTIN fee does not cover the cost of fingerprinting, which the government will cover by the examination fee.

Recordkeeping Costs to Continuing Education Providers

This is an interesting projection. The Internal Revenue Service will impose recordkeeping requirements on continuing education providers to maintain records and educational material for the programs and the registered tax preparers who attend them. The estimated cost to Continuing Education Providers: $38,632,500 annually. Of course, the obvious follow-up question is, “How much will IRS Tax Preparer Continuing Education Providers profit from offering the courses?”   The IRS hasn’t released those figures yet.

Recordkeeping Costs to Registered Tax Preparers

The IRS is projecting a recordkeeping cost to Registered Tax Preparers.  The costs include the cost of maintaining records and educational materials regarding the completion of the required qualifying continuing education credits. The Internal Revenue Service estimates the cost at $9,880,000, which turns out to be about $10.00 for each tax preparer.

Cost of IRS Registered Tax Preparer Competency Testing

While the IRS is not estimating the cost of competency testing, they have included the following factors that will play a part in the overall costs:

  • The cost of the examination
  • The costs associated with the amount of

    time required to study for it

  • The costs for any associated travel which will be dependent on the where the registered tax preparer lives relative to the testing location

The IRS has indicated that they expect to offer the competency test in multiple locations around the United States and even in some overseas locations.

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