IRS to Refund Registered Tax Return Preparer Test Fees.

(Parker Tax Publishing June 9, 2015)

The IRS has announced that, due to the invalidation of the Registered Tax Return Preparer program, it will be refunding fees incurred by preparers who took the competency test. The IRS has also released a FAQ addressing the refund. IRS RTRP Test Fee Refund FAQ.

Background

In 2011, the IRS issued regulations that mandated testing and continuing education (CE) for paid tax return preparers and created a Registered Tax Return Preparer (RTRP) credential. The RTRP designation was for preparers with valid preparer tax identification numbers, who passed an IRS competency test and completed 15 hours of CE. Return preparers were required to pay a $116 fee to take the test.

In Loving v. IRS, 2014 PTC 73 (D.C. Cir. 2014), the D.C. Circuit Court of Appeals upheld a D.C. District Court's holding that the RTRP program was invalid because the IRS did not have the legal authority to require education and testing. As a result, the IRS is refunding the test fees to individuals who took the Registered Tax Return Preparer test.

OBSERVATION: Before the Loving v. IRS decision invalidated the RTRP program, over 62,000 return preparers passed an IRS-administered competency test and completed the requirements to become RTRPs.

In June, 2014, the IRS launched a new voluntary program called the Annual Filing Season Program. In Rev. Proc. 2014-42 (6/30/14), the IRS provided guidance on the new program and what tax return preparers have to do to earn a "Record of Completion," which tells the public they have met the applicable IRS requirements with respect to tax returns or refund claims they have prepared and signed.

RTRP Refunds

The IRS has stated that no action is necessary on the part of preparers who participated in the RTRP program; Letter 5475, RTRP Refund Notification Letter, will be mailed approximately May 28, 2015, to people due an RTRP test refund. Refund checks will be mailed separately approximately June 2, 2015, and preparers should allow until August 2, 2015 to receive the refund.

Preparers who took the test more than once will receive one refund for the total test fees paid ($116 per test attempt). Whether the refund is taxable depends upon a number of factors, including whether the amount was deducted previously as a business expense. . Additionally, refunds will be only issued to the individual who took the test, so third parties, such as businesses, who paid test fees will need to resolve any reimbursement issues directly with the person who took the test.

The IRS will not reimburse other expenses related to taking the test, such as gas and travel or hotel bills. Preparers who passed the test may keep their RTRP Certificate, however, the IRS notes it is no longer valid and serves no purpose when dealing with the IRS. (Staff Editor Parker Tax Publishing)

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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