ASPPA ASAP re PTINS for 5500 "preparers"

[Belgarath]

Like many TPA's, we have folks on staff who "prepare" 5500 forms. They take the data certified by the client, and input it appropriately on the 5500 forms, based upon valuations performed using the certified data. Question is, is the IRS going to consider them "preparers?"

This is a potential nightmare if the IRS takes this position, which doesn't seem reasonable at all - the analyst really doesn't have any "discretion" in the 5500 preparation, other than the EA who is already registered so no problem. But your typical DC analyst shouldn't fall under this foolish proposal. What are people thinking/doing about this? Is ASPPA going to advocate against this foolishness?

Here's a link to the proposed regulations, and following is an excerpt of the applicable exception and examples. One problem, of course, is that this whole hoo-hah is really designed to "regulate" people who have discretionary ability to affect someone's income tax calculation, and that really doesn't generally directly apply to a 5500 form.

http://frwebgate.access.gpo.gov/cgi-bin/ge...cid=fr26mr10-17

(g) Only for purposes of paragraphs (d), (e), and (f) of this

section, the term tax return preparer means any individual who is

compensated for preparing, or assisting in the preparation of, all or

substantially all of a tax return or claim for refund of tax. Factors

to consider in determining whether an individual is a tax return

preparer under this paragraph (g) include, but are not limited to, the

complexity of the work performed by the individual relative to the

overall complexity of the tax return or claim for refund of tax; the

amount of the items of income, deductions, or losses

[[Page 14545]]

attributable to the work performed by the individual relative to the

total amount of income, deductions, or losses required to be correctly

reported on the tax return or claim for refund of tax; and the amount

of tax or credit attributable to the work performed by the individual

relative to the total tax liability required to be correctly reported

on the tax return or claim for refund of tax. A tax return preparer

does not include an individual who is not otherwise a tax return

preparer as that term is defined in Sec. 301.7701-15(b)(2), or who is

an individual described in Sec. 301.7701-15(f). The provisions of this

paragraph (g) are illustrated by the following examples:

Example 1. Employee A, an individual employed by Tax Return

Preparer B, assists Tax Return Preparer B in answering telephone

calls, making copies, inputting client tax information gathered by B

into the data fields of tax preparation software on a computer, and

using the computer to file electronic returns of tax prepared by B.

Although Employee A must exercise judgment regarding which data

fields in the tax preparation software to use, A does not exercise

any discretion or independent judgment as to the clients' underlying

tax positions. Employee A, therefore, merely provides clerical

assistance or incidental services and is not a tax return preparer

required to apply for a PTIN or other identifying number as the

Internal Revenue Service may prescribe in forms, instructions, or

other appropriate guidance.

Example 2. The facts are the same as in Example 1, except that

Employee A also interviews B's clients and obtains from them

information needed for the preparation of tax returns. Employee A

determines the amount and character of entries on the returns and

whether the information provided is sufficient for purposes of

preparing the returns. For at least some of B's clients, A obtains

information and makes determinations that constitute all or

substantially all of the tax return. Employee A is a tax return

preparer required to apply for a PTIN or other identifying number as

the Internal Revenue Service may prescribe in forms, instructions,

or other appropriate guidance. Employee A is a tax return preparer

even if Employee A relies on tax preparation software to prepare the

return.

Example 3. C is an employee of a firm that prepares tax returns

and claims for refund of tax for compensation. C is responsible for

preparing a Form 1040, ``U.S. Individual Income Tax Return,'' for a

client. C obtains the information necessary for completing the

return during a meeting with the client, and makes determinations

with respect to the proper application of the tax laws to the

information in order to determine the client's tax liability. C

completes the tax return and sends the completed return to employee

D, who reviews the return for accuracy before signing it. Both C and

D are tax return preparers required to apply for a PTIN or other

identifying number as the Internal Revenue Service may prescribe in

forms, instructions, or other appropriate guidance.

Example 4. E is an employee at a firm which prepares tax

returns and claims for refund of tax for compensation. The firm is

engaged by a corporation to prepare its Federal income tax return on

Form 1120, ``U.S. Corporation Income Tax Return.'' Among the

documentation that the corporation provides to E in connection with

the preparation of the tax return is documentation relating to the

corporation's potential eligibility to claim a recently enacted tax

credit for the taxable year. In preparing the return, and

specifically for purposes of the new tax credit, E (with the

corporation's consent) obtains advice from F, a subject matter

expert on this and similar credits. F advises E as to the

corporation's entitlement to the credit and provides his calculation

of the amount of the credit. Based on this advice from F, E prepares

the corporation's Form 1120 claiming the tax credit in the amount

recommended by F. The additional credit is one of many tax credits

and deductions claimed on the tax return, and determining the credit

amount does not constitute preparation of all or substantially all

of the corporation's tax return under this paragraph (g). F will not

be considered to have prepared all or substantially all of the

corporation's tax return, and F is not a tax return preparer

required to apply for a PTIN or other identifying number as the

Internal Revenue Service may prescribe in forms, instructions, or

other appropriate guidance. The analysis is the same whether or not

the tax credit is a substantial portion of the return under Sec.

301.7701-15 of this chapter, and whether or not F is in the same

firm with E. E is a tax return preparer required to apply for a PTIN

or other identifying number as the Internal Revenue Service may

prescribe in forms, instructions, or other appropriate guidance.

[Bird]

It's not clear yet. The people you describe, IMO, aren't preparers.

[rcline46]

The proposed test of compentency does not even apply to those who prepare 5500s because personal or business tax issues are not relevant. This needs strong lobbying against including 5500s because they are INFORMATION returns, not TAX returns.

[four01kman]

As I read the proposed regulations, only preparers of personal tax returns will be required to get the identification numbers, not preparers of the Forms 5500.

[pmacduff]

The ASPPA ASAP I received today says that while no one is sure; the regs do indicate that 5500 preparation IS included.

ASPPA is also awaiting the impact on Third Party Administrators and searching for clarification from the IRS.

BTW - just had to add another thought...any TPAs out there like us insulted that once again the IRS is going to "grandfather" CPAs and attorneys for this new requirement but not recognize any ASPPA designated (i.e. CPCs and QPAs) or other credentialed Pension professionals? This is getting to be too much! Another slap in the face. And yes - I do have ASPPA designations, been in the business for 20 years......

[chc93]

The ASPPA ASAP I received today says that while no one is sure; the regs do indicate that 5500 preparation IS included.

ASPPA is also awaiting the impact on Third Party Administrators and searching for clarification from the IRS.

The ASAP also says that someone who performs "clerical and incidental services" is not a "preparer".

My first thought when reading the ASAP was that this is a new "revenue source" for the IRS...

annual fee of $50 to $100 to register for a PTIN?

[austin3515]

Discretionary authority fits the job description of every dc tech at a TPA. I mean I suppose when it really comes down to it, none of us use discretion when preparing these things, since theoretically, there is really only one right answer. It's either right, or it is wrong, without much gray area. There should only be one correct answer for total assets, total active participants, etc. I'm hard pressed to come up with a single item of discretion... Maybe sheudle C presentation??

The whole thing is insane. I couldn't believe it when I read it, and that was before I read that we would all need training in general tax principles. This is almost as ridiculous as top-heavy rules...

[Bird]

5500s are considered tax returns for this purpose so it definitely applies to 5500 preparers.

I guess I'm the only one who thinks this is a good thing. I don't know if it will actually curb the garbage spewed out within our own industry by certain large payroll companies and others who are clueless, but that's what it is aimed at, I think.

[pmacduff]

chc93 we too agree about the revenue source. with the new EFAST2 system there probably won't be as many late filing penalities! I don't know how many of the $15,000 late filing penalties actually get wavied over the course of a year, but I'm guessing that there are client who just pay the penalty without trying the tear soak letter and the like. Then there is always the 2007 "late" letters that went out, many for clients who actually did file and filed timely!!!

[Peter Gulia]

Those who think that the IRS might be overreaching in regulating tax preparers (and I don't express a view) might want to read your neighbors’ reactions to my not-so-hypothetical in “Must a Form 5500 preparer tell her client that the plan is tax-disqualified?”

http://benefitslink.com/boards/index.php?s...c=46333&hl=

[doombuggy]

My first thought when reading the ASAP was that this is a new "revenue source" for the IRS...

annual fee of $50 to $100 to register for a PTIN?

mine too.....

The worst part is that, in working for a small business that apparently has no money, I am going to end up paying for this fee, plus for obtaining all the required CE credits that used to be paid for by the employer who wanted me to get the ERPA designation in the first place. I already work two jobs! :angry:

[R. Butler]

5500s are considered tax returns for this purpose so it definitely applies to 5500 preparers.

I guess I'm the only one who thinks this is a good thing. I don't know if it will actually curb the garbage spewed out within our own industry by certain large payroll companies and others who are clueless, but that's what it is aimed at, I think.

I think it is a positive also for similar reasons. While I can sympathize with the ASPPA designations holders, the ERPA was designed for that purpose. If they exempt ASPPA designations then you NIPA designees wanting an expemption. If you exempt ASPPA & NIPA, some other organization will want an exemption. Didn't necessarily think ERPA was good at the time, but since we have it, it meets this purpose.

[gregburst]

BTW - just had to add another thought...any TPAs out there like us insulted that once again the IRS is going to "grandfather" CPAs and attorneys for this new requirement but not recognize any ASPPA designated (i.e. CPCs and QPAs) or other credentialed Pension professionals? This is getting to be too much! Another slap in the face. And yes - I do have ASPPA designations, been in the business for 20 years......

Maybe the AICPA lobbies on behalf of its members. And maybe ASPPA is happy for this twist since it will be a cash cow for them since they administer ERPA?

[pmacduff]

and what more does the ERPA designation cost start to finish?

While I'm on my soapbox - would a Real Estate Attorney or be better equipped to complete a 5500 form than I?

Yet he/she doesn't have to obtain any extra credentials in order to do so.

I understand that it means that ASPPA and NIPA and the like would all want to be recognized, but are there really THAT many different pension specific credentials that could be acceptable? I think not.

my 2 cents.

[My 2 cents]

Did someone mention me?

I was too busy trying to find something in the proposed reg saying that it applied to 5500 filings, which are (at least in my mind) neither tax returns nor requests for refunds. If someone could point out where in the proposed reg 5500 filings get brought in, I would much appreciate it, since otherwise it would seem to have nothing to do with them.

[austin3515]

BTW - just had to add another thought...any TPAs out there like us insulted that once again the IRS is going to "grandfather" CPAs and attorneys for this new requirement but not recognize any ASPPA designated (i.e. CPCs and QPAs) or other credentialed Pension professionals? This is getting to be too much! Another slap in the face. And yes - I do have ASPPA designations, been in the business for 20 years......

just filing a DFVC application for a Form 5500 prepared by, yup a CPA!. Thankfully, the client did not file this ridiculous 2008 Form 5500 (plan has 8 participants):

-They indicated that the Plan's funding arrangement was the general assets of the employer

-They had the following Pension Feature Codes - 2K. That's it. Not even 2J.

-Here's the kicker - they filed a Schedule H, and for some reason did not get an accountant's opinion!!

I'm prepared to testify before Congress if they ask me!!

[K2retire]

Austin, as a CPA and QPA you appear to be uniquely qualified to point out that disparity to the regulators. Write your congressmen!

[FAPInJax]

Just attended the ACOPA symposium and this was a hot topic. Just filing in the blanks would not require the identification BUT IF there is some thought process that the person has to go through to determine how to answer a particular question then it is. The suggestion was that anyone and everyone should get a PTIN as soon as possible (I believe they are going to be made available in September). Once they come out with the exam (which may be specific to 5500 filing) in 2011 it will be more difficult.

[chc93]

Just attended the ACOPA symposium and this was a hot topic. Just filing in the blanks would not require the identification BUT IF there is some thought process that the person has to go through to determine how to answer a particular question then it is. The suggestion was that anyone and everyone should get a PTIN as soon as possible (I believe they are going to be made available in September). Once they come out with the exam (which may be specific to 5500 filing) in 2011 it will be more difficult.

But, doesn't each PTIN incur the $50-$100 annual fee? Was that an IRS suggestion? Sounds like extra cost (or revenue for the IRS) if "anyone and everyone" gets a PTIN. Thinking a bit more... the annual fee will only start later, so getting a PTIN now may not incur the fee... yet?

[Tom Poje]

Q and A info on IRS New Requirements for Tax Preparers can be found at

http://www.irs.gov/taxpros/article/0,,id=218611,00.html

One section discusses testing

in fact it mentions 2 tests - both deal with 1040s which of course have nothing to do with 5500s. found under the heading of

Will paid tax return preparers be limited to preparing only the types of tax returns that they have successfully tested on?

so unless they come up with a 5500 test I don't see how those tests would be required of 5500 preparers (if it comes to that point of all this being reqired of 5500 preparers). oh wait, its the IRS.

.......

there is also a section that talks about PTIN. it doesn't sound like you are 'saving' anything by applying 'now', but then, who am I to say.

[Belgarath]

I was very disappointed in the ASPPA recommendation. IMHO, they should have requested outright that this not apply to someone preparing a 5500 form. Sounded to me like they were playing politics.

The 5500 is an informational return!!! (In spite of the fact that under some definitions that it is a "tax" return for some purposes) Does the IRS require you to attach a copy of your 5500 when claiming a tax deduction on your return? Of course not.

Adding insult to injury, the testing procedure (as proposed at this point) will be testing on items that have nothing whatsoever to do with 5500 preparation. This is the grossest kind of stupidity, and I would encourage all ASPPA members to urge the committee to take a stronger stance.

http://www.form5500help.com/ASPPA_comment_lette_PTIN.pdf

[Tom Poje]

no disagreement here.

lets see, for a large plan you need an auditors opinion, I have yet to have a plan they haven't reviewed the 5500 thoroughly, but I guess their opinion counts for nothing in regards to being able to file if the preparer isn't certified.

on the reverse side of thing, a small plan - in almost all cases you can now file a 5500-SF - no attachments, and a limited amount of info at that.

I'm waiting to see what will become of all of this. I still can't see having 5500 preparers being certified is the intent of the legislation in regards to 1040 preparers.

[Kevin C]

Has anyone heard if the $64.25 annual fee is by calendar year or something else? I'm not sure I want to sign up now if they are going to want another $64.25 in three months. The exam isn't an issue since I'm an ERPA.

[Bird]

Looking at the form, it actually appears to be a one-time fee. It just says it's an application fee to request a PTIN. When this started it was expected that this was an annual fee, or maybe that was a misunderstanding. Or maybe I'm wrong and you have to re-apply each year, but I saw no indication of that on the form.

[Kevin C]

The IRS website says the proposed regs require annual renewal. (5th paragraph)

http://www.irs.gov/newsroom/article/0,,id=226697,00.html

[Bird]

The IRS website says the proposed regs require annual renewal. (5th paragraph)

You're right, thanks. But it's still a work-in-progress and who knows? You raise a good point and I think I'll wait until January (also an ERPA).

[Peanut Butter Man]

and what more does the ERPA designation cost start to finish?

While I'm on my soapbox - would a Real Estate Attorney or be better equipped to complete a 5500 form than I?

Yet he/she doesn't have to obtain any extra credentials in order to do so.

I understand that it means that ASPPA and NIPA and the like would all want to be recognized, but are there really THAT many different pension specific credentials that could be acceptable? I think not.

my 2 cents.

A Real Estate Attorney preparing a Form 5500 would be subject to disciplinary proceedings for engaging in work they are not competent to do. ASPPA credentials do not carry the same history of disciplinary proceedings that attorneys are subjected to by both the State Supreme Court before which the attorney is admitted to practice before and the IRS Office of Professional Responsibility. ASPPA is good about testing before issuing credentials but historically has not been good about policing those credentials or disciplining credentialed members for failure to comply with Circular 230.

I agree that the IRS should take a look at what the ERPA designation costs from start to finish, along with how much it costs an ERPA to meet the CPE requirements.

[BeanCounterBlues]

AICPA recently presented a lengthy and well written comment letter to IRS expressly requesting, among other things, that 5500 preparers be exempt from competency testing. I'm a CPA but agree it's ridiculous to make a 5500 only preparer be competent w/ respect to 1040's. IRS threw this program together too quickly w/ too little thought. It is aimed at eliminating the fraudulent preparer (mainly 1040's) that claim exemptions that don't exist, basing fees as a % of the refund and the list goes on. I fail to understand how a competency test (I prepare 1040's and 5500's and many other types of returns) will deter fraud. The whole system is aimed at unscrupulous preparers. If someone wants to commit fraud they are going to and a competency exam isn't going to make any difference. IRS has a public e mail address for comments on this subject (I have used to protest compentency testing for 5500 even though doesn't affect me). Not sure if still open or not. IRS needs to hear from everyone of us. If enough people make light of this IRS might listen.

[pmacduff]

PBM - I wasn't questioning whether the Real Estate attorney might not be subject to disciplinary action in the law community.

My point was that he could complete the 5500 per the IRS/EBSA guidelines because he is an attorney without having to have the ERPA designation.

Whereas I am a QKA, QPA with 20+ years of experience in pensions/401k etc. and 5500 filings and yet would be required to have the ERPA designation to complete 5500s.

We'll have to see where all this goes...

[austin3515]

Wasn;t there a deadline coming up on this for 10/31? Soimething about if you apply for the PTIN by 10/31 you will not need to take the comptetency test for a while?

When will these questions be answered?

[Bird]

The proposed regs said that it is anticipated that anyone who got a PTIN before the final regs were out would have a transition period. The final regs are expected late Oct/early Nov. I thought I remembered a specific timeline for the transition but can't find it and might be mis-remembering

[12AX7]

From the IRS FAQ:

Testing

1. What is the testing proposal? (posted 9/28/10)

The IRS has proposed that individuals who are not an attorney, certified public accountant, or enrolled agent will have to pass a competency test to officially become a Registered Tax Return Preparer. The IRS expects testing to begin in mid-2011.

Tax return preparers who have PTINs before testing becomes available will have until Dec. 31, 2013, to pass the competency test. After testing becomes available, new tax return preparers will be required to pass the competency test before they can obtain a PTIN.

Enrolled actuaries and enrolled retirement plan agents will also be exempt if they only prepare returns within their limited practice areas. More guidance on testing, the testing fee, and any other exempt individuals will be available in spring 2011.

I recall at ASPPA there was some discussion to obtain the PTIN before the end of 2010 to avoid the compentency test until required by 1/1/14 (assuming this would all apply to Form 5500). However, the FAQ states otherwise.

[chc93]

Enrolled actuaries and enrolled retirement plan agents will also be exempt if they only prepare returns within their limited practice areas. More guidance on testing, the testing fee, and any other exempt individuals will be available in spring 2011.

For enrolled actuaries, I wonder what returns are included "within their limited practice areas". I would assume/hope that this would include at least the Form 5500 series...

[12AX7]

I would suggest reading through this entire thread to get an idea as to how this may affect your preparation of Form 5500.

[Bird]

I got my notice in the mail and dutifully signed up, despite my earlier post that I would wait until January. The mailing indicated that it was needed after Jan 1 so I figured if I did it now it was really for next year. It was a nuisance; the irritations that I remember were entering my home address, then "permanent" address (I used my home again), then later, just "address" - it seemed to want a business address but the name of the business wasn't required although address was; I used my home again. They wanted to know if I owned a "tax preparation" business and I originally said yes, then changed it to no; not sure because I understand that they think we are preparing tax returns but that doesn't make it a tax preparation business IMO. Then when I'm trying to pay it says "both questions with "*" must be answered" and there was only one...and it wouldn't accept the credit card info and locked me out from trying after 3 times so I had to pay by e-check. Then at the end it says it is good through 11/30/2011. So if I had waited until Dec or Jan it would have been good through Dec? I dunno, I guess I shouldn't care. Oh yeah, and when you're entering your address they have drop-downs for every territory and country in the world so you start to type "N" for New Jersey and Northern Marianas Islands is first on the list, then "U" for United States starts with U. Jibip or something and you have to spend at least an extra second looking for the US. Grrrr.

[Belgarath]

Let us add one more in my series of giant raspberries for the IRS. THHHHHBBBBBBBTTTTTTTTTT!!!

[goldtpa]

Was going to get a PTIN. Then called about taking the ERPA exam to avoid having to take the IRS exam. Was told by the ERPA folks that I might have to take the IRS test as well as the ERPA test. When I asked why, the answer was that if I didnt complete both tests for the ERPA by the time the IRS announces the testing requirement, I may have to take both.

Well isnt that special.