What is a Preparer Tax Identification Number (PTIN)?

When you consider preparing the tax of others in the United States, you must have heard the term Preparer Tax Identification Number otherwise known as a PTIN. Any person in the tax preparation field must know what a PTIN is, and who requires it, and how to acquire it. In simple, easy to understand terms, this article will explain everything you need to know.

What is a PTIN?

A Preparer Tax Identification Number (PTIN) is a special number that is provided by the internal revenue service (IRS) to tax professionals who charge to prepare and/or assist in preparing a federal tax return. Concisely, when you make a living out of preparing the taxes of someone, you must have a PTIN.

The PTIN has a number of purposes:

• It assists the IRS in trailing tax preparers.
• It makes sure that the tax preparers are up to the standard established by the IRS.
• It gives accountability, thus simplifying the process of the taxpayers knowing who prepared their tax returns.
• It is required to have a PTIN to charge anyone a fee to prepare a federal tax return. In its absence, a tax preparer cannot prepare taxes on compensation.

Who Needs a PTIN?

A PTIN is not required by all people who handle a tax return, here’s a breakdown:

Tax Preparers Who Need a PTIN

You need a PTIN if you:

• File federal tax returns in compensation.
• Works in a company which prepares taxes and helps in the preparation of tax returns.
• Provide tax-related services e.g. e-filing or tax consulting which includes preparing tax returns on behalf of clients.

Who Doesn’t Need a PTIN

You do not need a PTIN if you:

• Prepare your own tax return.
• Volunteer to prepare tax returns in a nonprofit entity such as Volunteer Income Tax Assistance (VITA).
• Is a lawyer, CPA, or enrolled agent that has any other IRS-recognized identification (although many prefer to receive a PTIN).

Why is a PTIN Important?

A PTIN is not only legally required, but it is also a symbol of professionalism. 

Here’s why it matters:

Legal Requirement

The IRS requires the preparer of the federal tax returns to have a valid PTIN in case he or she is paid to do the preparation. The inability to get one may lead to fines or even the inability to prepare tax returns.

Professional Recognition

Reminding your PTIN on your tax returns proves that you are a registered tax professional. It aids in developing trust among clients since they are aware of the fact that you are up to IRS standards.

IRS Tracking

The PTIN enables the IRS to monitor the preparation of tax returns and thus attends to compliance and ensures the tax system remains intact.

How to Apply for a PTIN

To obtain a PTIN, it is simply applied and this can be done via mail or online. The procedure is set to be easy to follow, even to a beginner in tax preparation.

Step 1: Gather Your Information

Prior to commencing your application, you will require:

• Social Security Number (SSN)
• Name, address, and date of birth
• Contact information.

Information about the tax returns in the previous years (not mandatory but advisable)

Step 2: Apply Online

Your PTIN can be obtained in the easiest and quickest way via IRS PTIN system online:

• Visit the IRS PTIN website.
• Register a profile using personal information.
• Fill out the PTIN application form.
• Get the annual fee (typically approximately 35.95).
• Get your PTIN once you are successfully applied.

Step 3: Apply by Mail

You may also use Form W-12 (IRS Paid Preparer Tax Identification Number Application):

• Obtain or get Form W-12 at the IRS.
• Complete the form using your personal and professional data.
• Send the duly filled form to the IRS address on the instructions.
• Wait to be confirmed by mail (this can be several weeks).

PTIN Renewal

A PTIN expires after one calendar year and has to be renewed every year. The renewal is usually quicker than the original application.

• The next tax year begins on october every year with renewal.
• You would be able to renew online through your IRS account.
• Renewal fee amount is the same as the initial application fee.
• You can be prevented legally by not renewing your PTIN to prepare tax returns.

Tips for Maintaining Your PTIN

The following are some useful tips in maintaining your PTIN in good status:

Maintain your information: Update your PTIN account in case of any change of address or personal details.

Renew annually: Remind yourself to renew your PTIN annually before the October deadline.

Insert your PTIN on every tax return that you prepare: The IRS requires all returns prepared to be compensated to include the PTIN.

Keep up with compliance: To prevent penalties or the loss of your PTIN, comply with regulations, guidelines of the IRS regarding tax preparation.