SECTION 2. BACKGROUND

The accuracy of tax return preparation is essential to effective tax administration. More than half of the United States’ taxpayers rely on paid tax return preparers to assist them in preparing their federal tax

returns annually. While 40% of paid tax return preparers are credentialed as attorneys, CPAs, or EAs, most of the other 60% of paid tax return preparers lack any kind of professional credential or license. Basic competency for paid tax return preparers is essential to accurate return preparation, improved tax compliance, effective tax administration, and protecting taxpayers from preparer errors.

To further these goals, in 2011 the Treasury Department and the IRS published regulations under 31 U.S.C. § 330 (which are reprinted in Treasury Department Circular No. 230 (Circular 230)) that established registered tax return preparers (RTRPs) as a new category of practitioner and prohibited an individual who was not an attorney, CPA, EA, or RTRP from preparing tax returns for compensation. Circular 230 also set forth the requirements for RTRPs, which included passing a minimum competency examination and completing continuing education annually. Under these regulations, RTRPs were permitted to engage in limited practice by representing taxpayers before the IRS during an examination with respect to tax returns and claims for refund that the RTRP prepared and signed. At the same time, provisions in Circular 230 allowing any unenrolled or unlicensed tax return preparer to engage in limited practice by representing taxpayers during an examination of a return prepared and signed by the tax return preparer were removed.

In February 2014, the D.C. Circuit Court of Appeals in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014), held invalid the portion of Circular 230 regulating RTRPs as practitioners practicing before the IRS. Accordingly, the RTRP program is no longer in effect. In the Fiscal Year 2015 Budget, the Administration proposed that Congress provide the Treasury Department and the IRS with legislative authority to regulate tax return preparers. See General Explanations of the Administration’s Fiscal Year 2015 Revenue Proposals. Until legislation is enacted, the Treasury Department and the IRS have established an Annual Filing Season Program designed to encourage tax return preparers who are not attorneys, CPAs, or EAs to improve their knowledge of federal tax law. An unenrolled tax return preparer who successfully completes

July 14, 2014 192 Bulletin No. 2014–29

tax filing season refresher course (refresher course) that is administered by an IRS-approved continuing education provider (described in section 5 of this revenue procedure) are eligible to participate in the Annual Filing Season Program. The refresher course must generally cover tax law and filing requirements relevant to Form 1040 series returns and schedules. The refresher course must be 6 hours and must include a test of the material presented during the course that is given at the end of the course. The test must be a minimum of 100 questions. To successfully complete the refresher course, the applicant must pass the related test by answering 70% of the questions correctly (or a higher percentage if set forth in forms, instructions, or other appropriate guidance).

(b) Exceptions . The following applicants are not required to take the refresher course as a condition of eligibility to apply for a Record of Completion:

(i) Attorneys, CPAs, and EAs described in section 10.3 of Circular 230;

(ii) Individuals who passed the RTRP examination; and

(iii) Tax return preparers who are licensed or registered by any state, territory, or possession of the United States, including a Commonwealth, or the District of Columbia after passing an examination covering federal tax matters, and tax return preparers who have passed an examination covering federal tax matters administered by an entity recognized by the IRS as an eligible entity for purposes of this section. A list of states and other entities recognized by the IRS as offering an examination that qualifies for purposes of this exception will be posted on IRS.gov. Applicants who qualify for this exception must, upon request, present proof of their license, registration, or passage of an approved examination as required by the IRS in forms, instructions, or other appropriate guidance.

(3) Continuing education . (a) Applicants required to complete the refresher course . Applicants required to complete the refresher course must successfully complete 18 hours of continuing education from an IRS-approved continuing education provider (described in section 5 of this revenue procedure) during the calendar year prior to the year for

continuing education courses related to federal tax law will generally have a better understanding of the tax law necessary to represent a taxpayer before the IRS during an examination than an unenrolled individual who has not taken any continuing education courses related to federal tax law. Accordingly, this revenue procedure also modifies and supersedes Revenue Procedure 81–38, and in its place provides rules permitting unenrolled tax return preparers who have an Annual Filing Season Program Record of Completion to represent taxpayers during examination in certain limited circumstances.