IRS Lowers PTIN Fees As Another Court Battle Brews Over Regulating Tax Preparers

If you’re a paid preparer looking to renew your Preparer Tax Identification Number in 2024, it’s going to cost you… less. The IRS has again reduced the cost of PTIN fees, according to an interim final rule published this week.

In 2024, the cost to renew or obtain a PTIN will be just $19.75 ($11 user fee plus a $8.75 contractor fee). That’s significantly less than last year—in 2023, the cost to renew or obtain a PTIN was $30.75—and far less than the 2010 expense of at least $63 ($50 user fee plus a $14.25 contractor fee for a new application or $13 for renewal).

Who Needs A PTIN?

Any tax professional who prepares or helps prepare any federal tax return or claim for a refund and receives compensation must have a valid PTIN from the IRS. Some forms used for informational purposes, like Forms SS-4 and 2848, are excluded, as well as specific information returns, like Forms W-2 and 1099. You can see the entire list of excluded forms and returns here.

PTINs are preparer-specific—you’re not allowed to share. Failure to have a current PTIN could result in section 6695 penalties, injunction, and potential disciplinary action by the IRS Office of Professional Responsibility.

Background

Think of a PTIN as a substitute Social Security Number for tax preparers. Since 1999, tax return preparers have been able to use a PTIN on tax returns instead of their Social Security Numbers. It was a balancing act: the IRS was trying to protect taxpayers by requiring preparers to identify themselves on returns while simultaneously protecting the individual privacy concerns of preparers. At the time, PTINs were issued for free.

Beginning in 2010, PTINs not only became mandatory, but they also became subject to annual fees. The government justified the cost by pointing to 31 USC § 9701, which permits federal agencies to “charge for a service or thing of value provided by the agency.”

Other efforts to regulate tax preparers were invalidated in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014). But the PTIN rules stuck. (You can read more here.)

A lawsuit (Adam Steele, et al. v. United States of America, Case No. 1:14-cv-01523-RCL) followed, alleging that the IRS could not require PTINs or charge PTIN fees. The plaintiffs argued that the fees were not in exchange for a “service or thing of value.” And, the plaintiffs argued, even if the IRS had the authority to charge preparers PTIN fees, the fees were excessive.

The district court ruled that the IRS could continue to require PTINs for tax preparers. However, the same court found that PTINs did not constitute a “service or thing of value” that would justify a fee and barred the IRS from charging PTIN fees. As a result, the IRS did not collect PTIN fees between June 1, 2017, and Aug. 17, 2020.

Predictably, the government appealed, and on March 1, 2019, the district court’s decision was reversed. The IRS began charging PTIN fees again on Aug. 17, 2020.

Related Court Challenges

The Steele lawsuit to collect a refund of those PTIN fees which were previously deemed excessive chugs along. Their website states, “No money has been recovered, and the case is ongoing.”

Additionally, earlier this year, the lead plaintiff, Adam Steele, a certified public accountant licensed by the State of Minnesota, renewed efforts to put a stop to PTINs by filing another lawsuit. In response, the government filed a motion to dismiss based on, among other things, res judicata—that’s a legal term that means that you can’t re-hear a lawsuit that generally involves the same parties or facts and has already been decided. That related case, Adam Steele v. United States, Case 1:23-cv-00918-RCL, in also ongoing.

As It Stands Now

For now, however, the requirement that a paid preparer obtain a PTIN remains in place. You can register or renew for 2023 now, but not for 2024. The IRS typically opens the system for registrations and renewals for the coming year in late October.