* About 340,000 preparers must pass IRS test
* Stress may squeeze out elderly preparers
* Dec. 31, 2013 deadline for passing exam
By Patrick Temple-West
WASHINGTON, Oct 18 These are testing times for
The U.S. Internal Revenue Service is urging about 340,000
preparers of annual returns to take the agency's new proficiency
The test is part of a regulatory shake-up to the tax return
preparation business. The IRS started an overhaul in 2009 to
weed out illicit tax preparers who opened for business in tax
season and then disappeared before they could be prosecuted for
About 84 million tax returns were filed by paid preparers in
2011, according to IRS data. Every year, more than half of all
taxpayers pay someone else to do their taxes. The agency said it
prevented $14 billion in fraudulent tax refunds in 2011.
The test, which is a first of its kind, is required for any
tax preparer who is not a lawyer, a certified public accountant,
or an enrolled agent (a person certified to represent taxpayers
before the IRS).
An IRS spokesman said in a statement on Wednesday the agency
has no plans to extend the Dec. 31, 2013, deadline for taking
the test. The agency sent a letter on Sept. 28 urging preparers
to take the exam.
Preparers need to pass the test whether they are working
independently or for big tax preparation companies such as H&R
Block and Jackson Hewitt. A return preparer can be fined
for filing returns without certification.
About 6 percent of tax preparers who need to pass the test
by the end of next year had done so as of Oct. 1, according to
IRS figures. The test debuted last November.
Test-takers have 2 1/2 hours to finish 120 multiple choice
or true-or-false questions. The test costs $116.
The concern among tax professionals is that taxpayers might
find their return preparers either giving up voluntarily or
being squeezed out because of the test requirement. Some tax
preparation professionals said test-taking anxiety is driving
"The quality of tax preparation will go down" as
less-experienced preparers replace the seasoned tax veterans,
said Paul LaMonaca, vice president of the National Society of
Tax Professionals and a tax preparer in Falls Church, Virginia.
The IRS has not said how many test-takers are passing the
exam, but tax professionals said they are seeing more than 80
percent of test-takers prevail. The test can be retaken.
The low participation rate stems in part from the
demographics of the tax return preparation business. The
industry has been bolstered by older individuals, including
retired seniors who are math whizzes eager for some part-time
For these older tax preparers, many in their 70s or 80s,
"they just decided they are going to get through this next tax
season and then give it up rather than take the exam," said
Chuck McCabe, chief executive of the Income Tax School Inc. in
The other challenge is scheduling a time and place to take
the test at one of 260 national locations. By next year,
test-takers in rural Western states may have trouble finding
nearby testing locations. Tax preparers in urban areas may need
to leave town to take the test for lack of openings in their
H&R Block said it is covering the cost for its company-owned
preparer stores, while about 1,700 franchise-owned stores will
either cover the costs or their employees will pay for the test
Jackson Hewitt's franchise employees will also need to pay
for the test.
H&R Block and Jackson Hewitt said they were encouraging
their preparers to take the test to be certified for the coming
tax season that starts in January.