What’s The Problem With PTINs?

Adam C. Pozek | 02/23/11

I must confess that I have been very surprised by the vocal opposition to the new Preparer Tax Identification Number (PTIN) requirements.

As a brief background for any readers who may be scratching their heads, the IRS announced a new initiative designed to ensure that those who are paid to prepare tax returns meet certain minimum standards related to expertise and accountability.  In general, preparers must pass a competency exam, complete specified continuing education hours each year, comply with the ethical standards in IRS Circular 230 and obtain a PTIN.

Many in the qualified plan arena have been less than pleased at the prospect of being subject to these requirements.  Although the Form 5500 is now exempt, preparers of Form 5330 must still have PTINs.  Since the Form 5330 covers excise taxes related to ADP/ACP test failures, contributions exceeding the deduction limit and the delinquent deposit of 401(k) deferrals, it would appear many plan administrators should have PTINs.  Though, there are some very knowledgeable people who disagree on this point.

Since the IRS dropped the initial exam and CPE requirements for those who prepare 5330s, the cost for a PTIN is only $64.25 per person per year…not really cost-prohibitive.  Despite this fact, there continues to be significant opposition, and I just don’t get it.

For years, I have heard many retirement plan administrators and consultants lament the fact that despite having expertise in a very complicated area, we are often not treated with the same professional respect and deference as other professionals such as attorneys and CPAs.  However, at the first sign of the IRS seeking to apply the same standards of professionalism, these same lamenters have been some of the most vocal objectors.

It seems to me that rather than object, we should embrace and support this initiative.  Yes, it might require that we spend a little more time and money ensuring we have and maintain the requisite expertise to serve our clients.  Yes, it might mean that as knowledge increases we have to pay our employees a little bit more.  But, it would also mean that plan sponsors would consistently receive the level of service and expertise they should be able to expect.  How can that be a bad thing? 

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Topics: IRS, DWC

The views expressed in this blog are those of the authors and do not necessarily represent the views of any other person or organization. All content is provided for informational purposes only and is not intended to be tax or legal advice.