It is an unfortunate reality: many self-described tax professionals are not professionals at all. They are more than willing to take a customer’s money for “professional” work that often results in a nightmare situation for the taxpayer. This includes those who advertise services to help nonprofits with IRS Form 1023, the application for 501(c)(3) status or with Form 990, the annual return filed by nonprofits.
Several years ago, as a means of better regulating the paid tax preparer community and protecting the taxpaying consumer, the IRS introduced the Preparer Tax Identification Number, or PTIN, program. This voluntary program required the preparer to register with the IRS and obtain a PTIN that the preparer would then use as part of their signature on a tax return they prepared. Starting in 2012, the PTIN program is no longer voluntary…it is required of all paid preparers. In fact, it is now against the law for a tax preparer to charge a fee if that preparer has not yet obtained a PTIN.
So what does this mean for taxpayers? One important change is the criteria for obtaining and keeping a PTIN: testing and continuing education. In the past, anybody could print up business cards or throw up a website and call themselves tax professionals. No more! A paid preparer who is not a CPA, attorney, or Enrolled Agent must first pass a competency exam, then submit to 15 hours of continuing professional education each year in order to maintain their status.
It is important to point out that relying on the services of a non-registered preparer could cause serious headaches for your nonprofit. While any penalties would be assessed against the fraudulent preparer, the nonprofit itself could be subject to intense IRS problems or even audit.
Another important point is that the IRS is going to be on the lookout for rogue preparers who will try an end-around on the rules. They recently published the following advice:
Some unscrupulous preparers may attempt to elude the new oversight program by not signing returns they prepare. Taxpayers should never use tax return preparers who refuse to sign returns and enter PTINs. In an effort to identify these “ghost preparers,” the IRS later this year also will send letters to taxpayers who appear to have had assistance with their returns but lack tax return preparer signatures… The goal of the letters is to protect taxpayers by ensuring that all paid federal tax return preparers are registered with the IRS, and sign tax returns they prepare and use an identifying number when required to do so.
There is never a substitute for relying on the services of a competent professional. Now more than ever, make sure the person or company you are paying to assist your nonprofit is qualified to help you. The risk is simply too great not to.