Tax professionals across the country wrapped up a unique filing yesterday. While some still have to contend with an imposing stack of extensions that will be due on October 15, many are making plans to prepare for next filing season. It turns out that you should make room for another item on that checklist: paying the new Paid Tax Identification Number fee.
The Internal Revenue Service announced the resumption of annual PTIN fees for 2021 yesterday afternoon in a press release. The final regulations—titled “Preparer Tax Identification Number User Fee Update”—will officially publish in the Federal Register tomorrow. That means that the agency’s estimated 800,000 preparers will need to make room in their budget when applying for or renewing a PTIN.
How much is the new PTIN user fee?
The IRS says that PTINs will require a $21 application fee and $14.95 contractor fee for every new application or renewal. Since not having a PTIN means facing IRS penalties, tax professionals are incentivized to meet the December 31, 2020 deadline.
After a few years of not being required to pay, it’s only natural to wonder why there’s been a change. Here are a couple reasons:
- We noted in April that PTIN user fees initially went away in 2017 due to a DC District Court because of a legal challenge. That decision was overturned by the DC District Court of Appeals in 2019.
- The IRS is given the authority to charge the PTIN fee by the Independent Offices Appropriations Act of 1952, and the Office of Management and Budget places limits on those fees.
“The IRS is required (PDF) to conduct a biennial review of the PTIN user fee,” the IRS says in yesterday’s press release. “The agency determined that the full cost to administer the PTIN program going forward is $21 per application or renewal. This amount includes costs relating to PTIN misuse and maintaining the integrity of PTINs. The third-party contractor fee, $14.95, pays for several functions including processing applications, renewals and operating a call center.”
How do I apply for a PTIN?
The IRS says tax professionals have two options to apply for or renew a PTIN:
- Apply online at IRS.gov.
- Complete and file Form W-12.
To review the PTIN application process, visit the “PTIN Requirements for Tax Return Preparers” page on IRS.gov.
Source: IR-2020-159
Patricia Parrilla Tax Services