The AFSP . . . Explained
Carefully Consider Your Choices in
Complying with the Annual Filing Season Program!

by Jon Hayes, IAAM Executive Director
staff@iaam.net

July 11, 2014 -- With the new voluntary Annual Filing Season Program (AFSP) launched by the IRS, non-credentialed preparers should give careful consideration to participating simply because NOT doing so jeopardizes the viability of your business, especially if your competition - especially IRS credentialed competitors -- ramp up their marketing by warning taxpayers not to use preparers who aren't on the IRS database of "qualified" preparers. Avoid being victimized by such efforts.

Understanding Your Options

Let's review the new system so both credentialed and non-credentialed preparers can understand their current status and options if they still need to qualify to get on the database.

The AFSP program is intended to recognize the efforts of non-credentialed return preparers who aspire to a higher level of professionalism. The program requirements began on July 1, 2014, and the Annual Filing Season Program/Record of Completion will be effective for tax returns prepared starting in January, 2015.

For the voluntary program, a non-credentialed preparer must take an Annual Federal Tax Refresher (AFTR) course and pass a related comprehensive test. Individuals who pass this course/test and meet certain other guidelines will be listed, by January 2015, on the IRS.gov website in a public database of return preparers.

All tax practitioners are classified into 4 tiers:

Tier 1 includes practitioners already subject to other license/CE requirements at a high level: Attorneys; CPAs; Enrolled Agents; Enrolled Retirement Plan Agents, and Enrolled Actuaries. These professionals will automatically be on the Directory of Federal Return Preparers with Credentials and Select Qualifications and will not have to take any other action other than maintaining their current license/credential with the appropriate agency and obtaining or renewing their Preparer Tax Identification Number (PTIN) for the 2015 filing season.

Practitioners in this tier SHOULD NOT take an ASFP course or exam since they already maintain the highest client representation rights and are part of the "Credentialed Group" that is exempt from the AFTR course.

Tier 2 includes practitioners who are Registered Tax Return Preparers (RTRP); Accredited Tax Preparers (ATP); Accredited Tax Advisors (ATA); Accredited Business Accountants (ABA); state licensed individuals in California or Oregon; VITA instructors/reviewers; AND individuals who have passed part 1 of the EA exam in the last 2 years.

These practitioners will automatically be listed in the preparer directory on the IRS site, as long as they obtain their license/registration-specific required CE annually and have a current PTIN. They have no reason to take the course or test since they are part of the "Exempt Group." However, they must still obtain CE within their licensing group requirements to remain on the list.

For those who have passed Part 1 of the EA Exam, they must earn the 15 CPEs (3 in federal tax update; 10 in federal tax education, and 2 in professional ethics) each year.

Tier 3 consists of those who do not qualify for Tier 1 or Tier 2 but meet/satisfy the following requirements:

1) They have a current PTIN;

2) They take a specific 6 hour "Annual Federal Tax Refresher" course approved by the IRS and administered by an IRS-approved CPE provider and pass the related 100 question comprehensive test;

3) They earn 10 hours of other federal tax law CPE and 2 hours of ethics CE annually (for 2014, it is prorated to 3 hours of tax law and 2 hours of ethics and previously taken courses in calendar 2014 qualify); and

4) They must sign an agreement with the IRS to be subject to Circular 230, sub-part b provisions.

Once these preparers meet the 4 requirements, they can print their AFSP – Record of Completion from their PTIN account, be listed in the IRS public database, and earn the right to have limited practice rights to represent clients in certain audits for returns they prepared and signed.

Tier 4 consists of those preparers who do not qualify in Tier 1, 2 or 3. They may continue to do tax returns for compensation with a valid PTIN, but will not be listed on the IRS website and may no longer represent clients on returns they prepared and signed in certain audits after next year.

A Quick Summary

So, to insure your status for 2014, be sure to satisfy these requirements per your tier:

Individuals in Tier 1 and 2 need to continue to obtain CE within their normal licensing/registration specific requirements, without change.

Individuals in Tier 3 need to renew their PTIN, obtain normal CE within the normal rules, and they must take a special 6-hour refresher class and related comprehensive test from an IRS-approved CE Provider.

Individuals in Tier 4 don't have to do anything, although they risk losing clients who become aware that they have not demonstrated competence and are not approved preparers by the IRS.

Related Links:

Revenue Procedure 2014-42

AFSP FAQs and Updates

How to Earn Your AFSP or EA

If you are in Tier 4 and wish to elevate to Tier 3, you need to take an IRS-approved 6 hour refresher class and pass the related comprehensive test. Many organizations will be offering the course, including Fast Forward Academy, our provider of credentialing education. Visit www.fastforwardacademy.com for complete details on your options.

If you are in Tiers 3 or 4 and looking to elevate to Tier 1, which we strongly recommend, set your sights on passing the Enrolled Agent exam, which gives you full privileges and status before the IRS.

Remember, when you pass part 1 of the EA exam, you automatically satisfy AFSP refresher course and testing requirements, and you're placed on the registry (with completion of annual CPE in 2014). You then have up to two years to pass parts 2 and 3 of the exam to secure your elite status in Tier 1.

Fast Forward is Your Key

Again, no credentialing provider can match the program offered by Fast Forward Academy for the EA exam. Their 90-plus percent pass rate on the FIRST attempt leads the industry, and their preparation method of preparing for and passing one section at a time insures optimum success. Their online course is supported by quality customer service, and EVERY member I know who has taken the FFA course and earned the EA credential has openly endorsed the program for those seeking to establish the highest level of demonstrated competence.

Concluding Thought

I hope you take the time to carefully consider your current situation and the choices you have. I'm sure you will agree that your clients deserve the best possible service you can provide, and demonstrating professional competence is both a personal and professional "feather in your cap" and a great source of satisfaction.

Yes, the system is still flawed, but you can rise above any possible problems or confusion by passing the most comprehensive taxation exam in the world. Placing "EA" after your name separates you from the vast majority of your peers, and it gives you powerful marketing tools to increase your clientele and earn more money.

Visit Fast Forward Academy and get started!