A Preparer Tax Identification or PTIN was a creation of the Internal Revenue Service in 1999. The goal of the PTIN is to add a layer of privacy protection for all those who prepare tax returns. As privacy attacks grew more common, it was important to protect social security numbers. Those who prepare taxes can now provide their individualized PTIN or their social security number. There’s currently a small fee associated with registering for a PTIN, but acquiring a PTIN is the only way to prepare taxes legally in America.
The fee for a PTIN is just under $65 and can be paid to the IRS via credit or debit card. The PTIN is almost always required, but there is a list of exceptions to the rule on the IRS website. The safest bet for anyone who prepares taxes or assists, someone, in their preparation is to file for a PTIN. A PTIN registration is only good for a single year. It’s important that anyone who acquires a number remembers to renew it each and every tax season. The fee for renewal is about the same as the fee for the initial registration.
It is also important to note that only people who prepare – or are involved with the preparation of – tax returns need to register for a unique PTIN. For example, some enrolled retirement plan agents can avoid registration because they do not actively get involved with the preparation of a tax return. Depending on the forms a person deals with, there may be other registration requirements outside of a PTIN. Also note that those in the process of registering for a PTIN are still ineligible from a legal perspective to assist in tax preparation. Until the PTIN is received, it is illegal to assist in tax preparation. In terms of penalties, violations can result in fines, injunctions and more. The best course of action is to simply wait for approval.
Tax preparers who are part of an organization, may also have an EFIN, which is an Electronic Filing Identification Number that is given to a particular agency. The PTIN is only provided on an individual basis. Organizations that apply for an EFIN can receive one for free.
The best way to determine if you legally need a PTIN is to ask yourself if you prepare taxes for compensation. Those who simply volunteer their time to help the less fortunate or a friend are not required to obtain a PTIN. The moment they request compensation, they need to apply, however.