Do I Need a PTIN to Prepare Tax Returns?
Preparing federal tax returns for compensation involves specific IRS regulations. Understand the role of the PTIN in professional tax preparation.
A Preparer Tax Identification Number (PTIN) is an eight-digit number issued by the Internal Revenue Service (IRS) that begins with the letter ‘P’. The IRS uses this identifier to track federal tax returns to the specific individual who prepared them. Any paid tax preparer must have a valid PTIN and include it on every federal tax return they complete for a client.
Who is Required to Have a PTIN
The requirement for obtaining a PTIN is based on preparing federal tax returns and receiving payment for those services. Anyone who prepares or assists in preparing all or substantially all of a U.S. federal tax return for compensation must have a valid PTIN. This rule applies to various tax professionals, including Certified Public Accountants (CPAs), Enrolled Agents (EAs), and other compensated preparers.
Compensation is defined broadly and is not limited to direct monetary payment; it can include receiving property, services, or gifts in exchange for tax preparation services. The phrase “all or substantially all” refers to the preparer’s overall contribution to the return’s completion. It means the individual is responsible for the substantive accuracy of the return, not just clerical tasks like data entry.
For instance, a person who only inputs a client’s information into software under the direct supervision of another preparer may not need a PTIN. However, the supervising preparer who makes the final determinations about tax liability does. This requirement extends to all types of federal tax returns, such as income, payroll, estate, and gift taxes.
Exceptions to the PTIN Requirement
Several situations exist where an individual can prepare a federal tax return without a PTIN. The most common exception is for individuals who prepare their own personal tax returns. Another applies to those who prepare returns for others without receiving any form of compensation, such as for family members or friends as a favor.
Volunteers participating in IRS-sponsored programs are also exempt. These programs, including the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) initiatives, provide free tax help to low-to-moderate income individuals, persons with disabilities, the elderly, and limited English speakers.
A specific exemption also exists for employees who prepare their employer’s business tax returns. An employee preparing documents like federal payroll or excise tax returns as a regular part of their job duties does not need a PTIN. This exception is limited to the employer’s own tax documents and does not extend to preparing the personal tax returns of the business owner or other employees.
How to Obtain a PTIN
The application is completed through the IRS’s online portal for tax professionals. Applicants will need their Social Security Number, full name, mailing address, and date of birth. Business contact information may also be required, along with a copy of your most recently filed individual federal tax return for identity verification. The application also requires disclosure of any past felony convictions.
After creating a secure online account, you can proceed to the PTIN application. There is a fee of $19.75 for new applications and renewals, payable by credit card, debit card, or e-check. The online process is the fastest method, resulting in the immediate issuance of a PTIN upon completion and payment.
Maintaining Your PTIN
Once a PTIN is issued, it must be renewed annually. All PTINs expire on December 31 of each year and must be renewed to remain valid for the upcoming tax filing season. The renewal period opens in mid-October, and a renewal fee must be paid each year.
The IRS maintains a public, searchable directory of tax return preparers. The directory is limited to preparers who hold a professional credential, such as attorneys, CPAs, and Enrolled Agents, or those who have an Annual Filing Season Program Record of Completion. This directory allows taxpayers to find qualified preparers in their area and verify their specific credentials.