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IRS tax preparer requirements: PTIN, EFIN, CE and security

The short answer

Four things come up for a paid preparer. Every paid preparer needs a PTIN. An EFIN comes with becoming an Authorized IRS e-file Provider. Enrolled agents have continuing education requirements, the voluntary Annual Filing Season Program has its own, and the IRS encourages continuing education for all tax return preparers. The FTC Safeguards Rule treats a tax preparation business as a financial institution that shall keep a written information security program.

PTIN

The IRS says: "Anyone who prepares or assists in preparing federal tax returns for compensation must have a valid 2027 PTIN before preparing returns. All enrolled agents must also have a valid PTIN." The IRS says: "All PTINs expire on Dec. 31 of each year and are required to be renewed to be current and active. PTIN renewal open season begins mid-October each year for the following year." The fee shown on the IRS page for 2027 is $18.75. Online renewal "only takes about 15 minutes." The paper option, Form W-12, "will take 6 weeks to process." A paper W-12 sent in December may not be processed before the Dec. 31 expiry.

Details: PTIN renewal for 2027, renewing late or after it expired, and the Form W-12 lines.

EFIN

Publication 3112 defines an Authorized IRS e-file Provider as "a business or organization authorized by the IRS to participate in IRS e-file." To become one, "The firm submits an e-file application, meets the eligibility criteria and must pass a suitability check before the IRS assigns an Electronic Filing Identification Number (EFIN)." The IRS application page says to sign in to an existing account or create a new one, then complete and submit the application. The IRS names three steps: access the e-file application, submit it, and pass a suitability check.

The IRS also says Publication 3112 gives step-by-step guidance on the e-file application.

Details: EFIN requirements, the data security part.

Continuing education and the Annual Filing Season Program

The IRS Annual Filing Season Program page answers "Do I have to get an Annual Filing Season Program - Record of Completion?" with: "No, it's voluntary. Anyone with a preparer tax identification number (PTIN) can prepare tax returns for compensation, but continuing education is encouraged for all tax return preparers."

Those who choose to take part "can meet the requirements by obtaining 18 hours of continuing education, including a six hour federal tax law refresher course with test." They must also renew their PTIN for the upcoming year and "consent to adhere to the obligations in Circular 230, Subpart B and section 10.51." Those who passed the Registered Tax Return Preparer test and certain other recognized national and state tests are exempt from the refresher course and need 15 hours of continuing education each year. Participants receive a Record of Completion and are included in a public IRS directory of return preparers. The IRS says the program "is not directed at or necessary for credentialed preparers such as attorneys, CPAs, enrolled agents, enrolled retirement plan agents or enrolled actuaries."

For enrolled agents the IRS page lists: "Obtain 72 hours (66 hours of qualifying CE and 6 hours of ethics) every three years based on your renewal cycle," and "Obtain a minimum of 16 hours per year (2 of which must be on ethics)." This page does not cover continuing education rules for CPAs or attorneys.

Data security

Section 314.2 of the FTC Safeguards Rule says: "An accountant or other tax preparation service that is in the business of completing income tax returns is a financial institution" because tax preparation services "is a financial activity listed in 12 CFR 225.28(b)(6)(vi)." Section 314.3(a) says "You shall develop, implement, and maintain a comprehensive information security program that is written in one or more readily accessible parts and contains administrative, technical, and physical safeguards that are appropriate to your size and complexity, the nature and scope of your activities, and the sensitivity of any customer information at issue." Form W-12 calls it a "written information security plan," and IRS Publication 5708 shortens that to WISP.

Form W-12, line 11, says "You must check a box," Yes or No, next to this statement: "I am aware that paid tax return preparers are required by law to create and maintain a written information security plan that provides data and system security protections for all taxpayer information."

Section 314.6 says: "Section 314.4(b)(1), (d)(2), (h), and (i) do not apply to financial institutions that maintain customer information concerning fewer than five thousand consumers." The count is consumers, not staff, and the rest of 314.4 still applies.

Start with the FTC Safeguards Rule in plain words and what a WISP is. The line 11 guide explains that checkbox. The free WISP generator makes a draft.

The IRS Security Six

IRS Tax Tip 2019-117 (August 27, 2019) says tax professionals "should review security steps," and that part of this review "is following the “Security Six” protections." The six are anti-virus software, firewalls, two-factor authentication, backup software or services, drive encryption and a virtual private network. Of anti-virus software the IRS says vendors "find new issues and update malware daily," which the IRS says is "why it’s important for users to install the latest updates of the software." Of a VPN it says it "provides a secure, encrypted tunnel to transmit data between a remote user over the internet and the company network." The Tax Tip says tax professionals "should" use these protections. The written-program requirement quoted above comes from the FTC rule. See the Security Six explained.

Reporting data theft

In its reminders for e-file applicants and providers, Publication 3112 says: "In the event a security breach occurs, report any suspected data theft or data loss immediately to the appropriate IRS Stakeholder Liaison." See what to do and who to tell. For the FTC side, see the breach notice guide.

Sources

This is general information, not legal advice.

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