What Is a Preparer Tax Identification Number?
A Preparer Tax Identification Number (PTIN) is an Internal Revenue Service identifier implemented in 1999 that since 2010 has required all paid federal tax return preparers to register with the federal government and obtain a unique number. Preparer tax identification number applicants must provide satisfactory answers to several suitability questions to receive a PTIN. Tax preparers must renew their PTINs each calendar year.
Understanding Preparer Tax Identification Number (PTIN)
In addition to obtaining a Preparer Tax Identification Number (PTIN), the IRS requires enrolled agents to pass a test and complete continuing education requirements. These additional requirements do not apply to attorneys and certified public accountants in good standing, or to supervised preparers and non-1040 preparers, whose work is overseen by an enrolled agent, attorney or CPA.
The PTIN was created in 1999 to protect the privacy of tax preparers. From 1999 to 2010, preparers were given the option of providing their PTIN or Social Security Number when signing tax returns. In September 2010, the IRS created a new electronic PTIN system. Since then about 1.65 million PTINs have been issued, and 753,884 individuals held current PTINs as of March 18, 2020. CPAs represent the largest credentialed group with 206,166 individuals currently holding PTINs.
Preparers were originally charged a registration fee of $64.25 and annual renewal fees similar to the registration fee. The fee reduced to $50 in 2016 after a class action lawsuit commenced against the IRS and eliminated following a ruling on the class action in 2017. The fee had been the same for every preparer, regardless of how many returns the preparer filed.
PTIN Fees Ruled Illegal
A federal judge ruled in June 2017 that collecting fees for issuing PTINs was illegal and that the IRS had exceeded its authority in doing so. U.S. District Court Judge Royce Lamberth concluded that while the IRS could issue PTINs, the fees were illegal in that they were not a “service or thing of value” provided by the agency. The case was Steele, et al. v. United States, and was a class action representing all individuals and entities who have paid a PTIN.
Following the ruling, the IRS suspended the PTIN system but reinstated it without requiring fees later in June. Taxpayers can search for a registered tax preparer and verify that their tax preparer is registered by checking the IRS’ PTIN directory.
PTINs have been required since the 2011 filing year and the IRS has collected PTIN fees estimated in excess of $175 million. Unless this case is reversed on appeal, the IRS will have to refund that money.