Preparer definition


K

kytaxguy

I'm a licensed CPA in KY, but not in public practice. Member of the
AICPA and the KY society. As a courtesy to my boss and a couple of
his (adult) kids, I prepare but don't sign their tax returns each
year. I don't get paid (my salary wasn't increased when I started
doing this and it won't be decreased if I quit doing it.)

At a recent CPE, a couple of the participants indicated that I was
required to sign the return, but the discussion quickly shifted and I
didn't find out why they thought that. Is there a "black and white"
requirement that an unpaid preparer sign a return? I do understand
that there are some new IRS requirements coming in but am concerned
that there is something I've missed in the past.

On a related matter, I also prepare my mom's and son's returns - same
issue?

Thanks
 
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M

Mark Bole

I'm a licensed CPA in KY, but not in public practice. Member of the
AICPA and the KY society. As a courtesy to my boss and a couple of
his (adult) kids, I prepare but don't sign their tax returns each
year. I don't get paid (my salary wasn't increased when I started
doing this and it won't be decreased if I quit doing it.)

At a recent CPE, a couple of the participants indicated that I was
required to sign the return, but the discussion quickly shifted and I
didn't find out why they thought that. Is there a "black and white"
requirement that an unpaid preparer sign a return? I do understand
that there are some new IRS requirements coming in but am concerned
that there is something I've missed in the past.

On a related matter, I also prepare my mom's and son's returns - same
issue?

For the free returns you do for family members (or friends and
neighbors), no need to sign.

For your boss, perhaps a little more problematic. Is your boss a sole
proprietor (or disregarded SMLLC)? Then I think you're OK doing his
return without signing, as an employee. But if your employer is a
corporation or partnership, and you are doing individual returns for
other employees (your boss) on company time, then I think you probably
should be signing, but I haven't studied the regs in detail to determine
this.

I'd recommend you either sign the returns as paid preparer (and register
your PTIN with the IRS), or stop doing them. In the former case, you
might also want to establish a dollar amount of your pay that
corresponds to the return preparation fee. Conversely, your boss now
also has additional taxable compensation from the company (in the form
of an employee fringe benefit).

You might compare this to what the national storefront tax prep chains
do, for example. When free tax return prep is offered to the front desk
employees as a perk of the job, the tax pro employee who prepares it
must sign, and the recipient gets taxable compensation added into box 1
of the W-2.

-Mark Bole
 
R

removeps-groups

For your boss, perhaps a little more problematic.  Is your boss a sole
proprietor (or disregarded SMLLC)?  Then I think you're OK doing his
return without signing, as an employee.  But if your employer is a
corporation or partnership, and you are doing individual returns for
other employees (your boss) on company time, then I think you probably
should be signing, but I haven't studied the regs in detail to determine
this.
I don't agree with your different handle of Schedule C bosses versus
form 1120 bosses. Seems to violate the form over substance
principle. Seems the return should be signed in both cases, and money
officially charged in both cases (not just the 1120 case).
I'd recommend you either sign the returns as paid preparer (and register
your PTIN with the IRS), or stop doing them.  In the former case, you
might also want to establish a dollar amount of your pay that
corresponds to the return preparation fee.  Conversely, your boss now
also has additional taxable compensation from the company (in the form
of an employee fringe benefit).
There is now a cost to register a PTIN. I think it's around $60 a
year.
 
A

Arthur Kamlet

I don't agree with your different handle of Schedule C bosses versus
form 1120 bosses. Seems to violate the form over substance
principle. Seems the return should be signed in both cases, and money
officially charged in both cases (not just the 1120 case).

I can't think of a good reason why an employee who prepares a tax
return for his employer would not be a "paid preparer."
There is now a cost to register a PTIN. I think it's around $60 a
year.

Currently $50.00 for the IRS plus $14.25 for the Third Party
Administrator.
 
M

Mark Bole

I can't think of a good reason why an employee who prepares a tax
return for his employer would not be a "paid preparer."

Treas Reg 301.7701-15(f)(1)(ix):

"The following persons are not tax return preparers:
[...]
An individual preparing a return or claim for refund of a taxpayer, or
an officer, a general partner, member, shareholder, or employee of a
taxpayer, by whom the individual is regularly and continuously employed
or compensated or in which the individual is a general partner."

So, maybe he's not a return preparer for his boss after all, regardless
of the type of entity he works for. But for the relatives of the boss,
I think he still is.

-Mark Bole
 
A

Arthur Kamlet

I can't think of a good reason why an employee who prepares a tax
return for his employer would not be a "paid preparer."

Treas Reg 301.7701-15(f)(1)(ix):

"The following persons are not tax return preparers:
[...]
An individual preparing a return or claim for refund of a taxpayer, or
an officer, a general partner, member, shareholder, or employee of a
taxpayer, by whom the individual is regularly and continuously employed
or compensated or in which the individual is a general partner."

So, maybe he's not a return preparer for his boss after all, regardless
of the type of entity he works for. But for the relatives of the boss,
I think he still is.

OK - you've convinced me.
 
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R

removeps-groups

Meaning either sign for both, or not sign for both Schedule C and
employees and corporation employees.
I can't think of a good reason why an employee who prepares a tax
return for his employer would not be a "paid preparer."
Treas Reg 301.7701-15(f)(1)(ix):

"The following persons are not tax return preparers:
[...]
An individual preparing a return or claim for refund of a taxpayer, or
an officer, a general partner, member, shareholder, or employee of a
taxpayer, by whom the individual is regularly and continuously employed
or compensated or in which the individual is a general partner."
This regulation does not make sense to me. So if my boss has 2
businesses, and a files a 1040 with 2 Schedule C's, and a I work for
one of those businesses, then I'm not a not a paid tax preparer? I
think the regulation only allows the ability of me to prepare the
Schedule C or 1120 for the business that I work in without signing,
but if I prepare other Schedule C's, or the personal Schedule A/B/D/M/
6251/etc then those forms must be signed. (Of course, Schedule C has
no space for a signature, but that's besides the point.)
 
P

paultry

Meaning either sign for both, or not sign for both Schedule C and
employees and corporation employees.
I can't think of a good reason why an employee who prepares a tax
return for his employer would not be a "paid preparer."
Treas Reg 301.7701-15(f)(1)(ix):

"The following persons are not tax return preparers:
[...]
An individual preparing a return or claim for refund of a taxpayer, or
an officer, a general partner, member, shareholder, or employee of a
taxpayer, by whom the individual is regularly and continuously employed
or compensated or in which the individual is a general partner."
This regulation does not make sense to me. So if my boss has 2
businesses, and a files a 1040 with 2 Schedule C's, and a I work for
one of those businesses, then I'm not a not a paid tax preparer? I
think the regulation only allows the ability of me to prepare the
Schedule C or 1120 for the business that I work in without signing,
but if I prepare other Schedule C's, or the personal Schedule A/B/D/M/
6251/etc then those forms must be signed. (Of course, Schedule C has
no space for a signature, but that's besides the point.)
Schedule C relates to the business activity of a sole
proprietor. You can't work for a fictitious entity, only
for the sole proprietor doing business as the fictitious
entity. Even, if he has multiple DBAs, you still work for
him.
 
S

Stuart A. Bronstein

This regulation does not make sense to me. So if my boss has 2
businesses, and a files a 1040 with 2 Schedule C's, and a I work
for one of those businesses, then I'm not a not a paid tax
preparer? I think the regulation only allows the ability of me
to prepare the Schedule C or 1120 for the business that I work
in without signing, but if I prepare other Schedule C's, or the
personal Schedule A/B/D/M/ 6251/etc then those forms must be
signed. (Of course, Schedule C has no space for a signature,
but that's besides the point.)
I think the idea is that if an employee of a company does that
company's tax return, it's considered the company doing its own
return. So if there are two businesses owned by the same person, and
you are employed by one, you would be considered a preparer for that
other return.
 
B

Bill Brown

Keep in mind that the employee of a corporation is not the employee of
the person who owns the corporation. A corporate employee completing
the corporation's return is not a preparer. A corporate employee
completing the corporation's owner's tax return is likely to be
classified as a preparer.
 
M

Mark Bole

Keep in mind that the employee of a corporation is not the employee of
the person who owns the corporation. A corporate employee completing
the corporation's return is not a preparer. A corporate employee
completing the corporation's owner's tax return is likely to be
classified as a preparer.

That's the recollection I based my original reply on, but the reg. seems
to indicate an employee can prepare for several others (stockholders,
other employees) associated with the firm and still not be a "tax preparer".

-Mark Bole
 
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D

D. Stussy

Bill Brown said:
Keep in mind that the employee of a corporation is not the employee of
the person who owns the corporation. A corporate employee completing
the corporation's return is not a preparer. A corporate employee
completing the corporation's owner's tax return is likely to be
classified as a preparer.
....But not a PAID preparer, unless the owner pays the corporation.
 
M

Mark Bole

....But not a PAID preparer, unless the owner pays the corporation.
.... by virtue of having taxable fringe benefit compensation added to W-2
Box 1, which is then considered to be paid for the tax prep....

In other words, the recipient of this employer-provided tax prep will
probably have taxable fringe benefit, no matter what.

-Mark Bole
 
A

Arthur Kamlet

... by virtue of having taxable fringe benefit compensation added to W-2
Box 1, which is then considered to be paid for the tax prep....

In other words, the recipient of this employer-provided tax prep will
probably have taxable fringe benefit, no matter what.

And if the tax preparer does all the corporation's 1099-DIVs?
 
M

Mark Bole

And if the tax preparer does all the corporation's 1099-DIVs?
I don't understand the question? The employee who prepares the
information returns is being paid, and the company is deducting that
labor expense.

-Mark Bole
 
A

Arthur Kamlet

I don't understand the question? The employee who prepares the
information returns is being paid, and the company is deducting that
labor expense.
I would think the corporate employee who prepares 1099-DIVs for
all shareholders including the company CEO whould still not be
classified a tax return preparer.
 
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D

D. Stussy

Mark Bole said:
I don't understand the question? The employee who prepares the
information returns is being paid, and the company is deducting that
labor expense.
He's not paid BY THE TAXPAYER whose return he's doing... (directly or
indirectly).
 

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