Newsletter Issue # 5 : Tax Return Preparers Exam Articles Series:
What Are the Steps to Obtain a Preparer Tax Identification Number (PTIN) |
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Matters Regarding the IRS Competency Examination Matters You Are Asking About Are Examined Here
Beginning January 1, 2011, the Preparer Tax Identification Number (PTIN) regulations requires all tax return preparers who are compensated for preparing tax returns, or assisting in the preparation of all, or substantially all, of a tax return or claim for a tax refund, to register and obtain a PTIN. In
this article I walk you through the process of obtaining a PTIN an  d summarize the most import issues you need to be aware of, regarding the PTIN.
A Preparer Tax Identification Number (PTIN) is a number issued by the IRS to paid tax return preparers. It is used as the tax return preparer's identification number and, when applicable, must be placed in the Paid Preparer section of a tax return that the tax return preparer prepared for compensation.
 From the IRS website, there is a four step process to obtain your PTIN. It is for any individual who, for compensation, prepares all or substantially all of a tax return or claim for refund needs a PTIN. You can sign up for you PTIN online in the IRS website, or by paper, by filling out and submitting the form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application. These four steps to obtain a PTIN are: Step One: Create your account by providing your name, email address and security question information. The system will then email you're a temporary password, which you will change when you go back to enter your information in the PTIN application. Step two: Apply for your PTIN online or by paper application. Doing it online is faster and you obtain your PTIN instantly while by paper application it will take 4-6 weeks. To complete the application you should provide personal information, information about your previous year's tax return, professional credentials, and more. Step three: In the online application, the system will transfer you to an IRS partner bank where you will make your payment by credit card or direct debit. There is an annual fee of $64.25 for a PTIN. If you apply using form W-12, you must follow the instruction about the payment methods. Step Four: get your PTIN instantly applying online. After the bank confirms your payment, your PTIN is provided online. You will receive a welcome letter providing additional guidelines. If you apply with W-12, you will receive your PTIN by mail. Once you have your PTIN, you need to renew it on an annual basis. To keep track of your PTIN, it is a good idea to register with the IRS e-services under tax professionals in the IRS website. If you are planning to become a Registered Tax Return Preparer (RTRP), you need to meet several requirements where having your active PTIN is the first and main one. You need that PTIN to take the IRS competence examination, which is another requirement you must meet to become a RTRP. The IRS test will be available in mid-Fall-2011.Inasmuch as the test contents outline published by the IRS covers an extensive amount of materials, candidates should take time to plan the use of available resources to be able to review the tax concepts in order to be successful in the test room. If you are planning to take the tax return preparer competency examination,being proactive in the IRS competency examination process is a step in the right direction. Timing is gold here. The sooner you can introduce yourself as a Registered Tax Return Preparer, the sooner you can take the lead over your competitors who decide to wait until last minute to prepare themselves. Please, don't let time run out without taking action toward being informed about the IRS exam. Visit our website and learn more about the tools we prepared to ssist you: http://1040examprep.com/blog/ Read the next article of this series, "When Should You Take the IRS Exam?" |
To get it right, you've got to get it! |
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Practice, practice and more practice
Topic: Gross Income
Bill operates a retail business selling illegal narcotic substances. Which of the following item(s) may Bill deduct in calculating business income?
- Cost of merchandise
- Business expenses other than the cost of merchandise.
Answer: 1) just the cost of merchandise. Remember the broader definition of income "income from all sources" that includes illegal sources. Gross income definition is sales minus cost of goods sold. Business expenses that are incurred in an illegal activity are deductible if they are ordinary and necessary. However, no deduction or credit is allowed from any amount that is paid or incurred in carrying on a trade or business which consists of trafficking in controlled substances
(Source: adapted from Wiley CPA Review - Regulation) |
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Learning tax concepts: definitions
Tax Term: English (E), Spanish (S)
Alternative Minimum Tax (AMT) (E)
Impuesto Mínimo Alternativo (AMT) (S)
A tax imposed only to the extent it exceeds the regular income tax. AMT is the greater of the tax liability calculated by using AMT rules and the tax liability calculated using the regular income tax rules. AMT rates are 26% and 28% for individual taxpayers and 20% for corporate taxpayers and it is applied to the AMT base. The AMT base is calculated by modifying taxable income by:
- Adding tax preferences;
- Adding or deducting certain adjustments; and
- Deducting the exemption amount.
 | | From 1040 Exam Prep e-Books Series |
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