Archive for September 27th, 2011

The IRS issued Notice 2011-80 today, requiring PTIN holders to annually renew their PTINs.


The IRS has published final regulations providing that after December 31, 2010, all individuals who prepare all or substantially all of a tax return or claim for refund for compensation must have a PTIN and must use that PTIN as their sole identifying number. The PTIN comes at the price of a $50 user fee to the IRS, plus any IRS approved fee charged by the third-party vendor, to initially obtain and to annually renew a PTIN.

Only attorneys, certified public accountants, enrolled agents, registered tax return preparers, and individuals authorized under § 1.6109-2(h) are eligible to receive a PTIN.

Renewal Process

The IRS has decided that all PTINs must be renewed on a calendar year basis using the IRS’s online PTIN application available at www.irs.gov or paper application, Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and pay the required fee (currently $64.25, $50.00 IRS user fee plus $14.25 vendor fee) after October 15th and before January 1st each year.

PTINs renewed during this period will be valid from January 1st through December 31st of the following calendar year. PTINs obtained or renewed during a calendar year will expire on December 31st of that year.

Individuals obtaining a new PTIN after October 15th will have the option of receiving a PTIN for the current calendar year or the following calendar year. Individuals who choose to receive a PTIN for the current calendar year will be required to renew their PTIN before January 1st to prepare returns during the following calendar year. Individuals who choose to receive a PTIN for the following calendar year may not prepare tax returns for compensation during the remainder of the current calendar year. Instead, the PTINs issued to these individuals will be valid for the following calendar year.

To assist with the transition to a calendar year renewal period, the IRS has determined that PTINs issued after September 27, 2010 and before October 16, 2011 will expire on December 31, 2011.

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The prevailing attitude among most tax advisers is that if given their druthers, small businesses should be established as an S corporation or LLC. Setting up a business as a “C” corporation, with its seemingly inefficient potential for double-taxation (product placement!), is often not given much in the way of consideration.   

According to a recent study, however, there are nearly $1.6 million small businesses currently operating as C corporations. With treatment as an S corporation or LLC readily available to most taxpayers, why would so many businesses opt for the supposedly inefficient taxing regime imposed by subchapter C?

As illustrated by this excellent article by Martin A. Sullivan (Tax Analysts) — The Small Business Love-Hate Relationship With Corporate Tax —  there are more advantages to operating as a C corporation then most realize, including:

  • the graduated tax rates available to corporations under Section 11;
  • the current 15 percent rate on qualified dividends;
  • the ability for a shareholder to defer individual taxation on undistributed earnings of the corporation; and
  • advantageous rules regarding tax-free fringe benefits for shareholder-employees when compared with S corporations and LLCs. 

Give it a read. You know you want to.

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