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Retirement Officials to IRS: Do New Form 1040 Rules Apply to Form 5500?

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Retirement planning officials are asking the IRS to clarify whether the new IRS regulations that take effect Jan. 1 requiring each paid tax preparer to register under the Preparer Tax Identification Number (PTIN) program and meet competency standards in order to practice before the IRS also applies to the preparation of Form 5500.

Robert Richter, president-elect of the American Society of Pension Professionals & Actuaries (ASPPA), told the IRS before a hearing on Friday about the new rules that Form 5500 “is largely an informational return versus the standard income tax return, Form 1040.” It is not clear, Richter told the IRS, “that the definition of tax preparer under §IRC 6109 is the same as that contained in Section 6694 which has led to confusion about who should be registered in the program.”

The IRS was still conducting its hearing on Friday morning and had not provided an answer to ASPPA’s question. However, an ASPPA spokesperson told AdvisorOne that the IRS scheduled the hearing “to gather information, and we understand they will give our comments consideration and issue final regulations.”

Since many of ASPPA’s members are third-party administrators (TPAs) who use a team approach to prepare the annual Form 5500 report as required under ERISA, Richter said, preparing “a single Form 5500 typically requires many individuals to gather information from sources such as investment providers, plan administrators, actuaries, and other service providers.” Richter explained that if registration is mandated than there’s the possibility that “each of these individuals would need to be registered as paid preparers even though their focus may be very limited. As a result, this could increase the costs associated with the preparation of the form, which ultimately will be borne by plan participants.”

The IRS, Richter said, should strike a balance “between the benefits and the costs associated” with registering, so as not to “increase expenses for participants and retirees.”

If the new IRS rules do apply to Form 5500, Richter said ASPPA recommends the IRS “designate a single preparer (the individual with supervisory authority) to register on behalf of the firm as the preparer for purposes of filing Form 5500 and issue guidance on which components of Form 5500 have sufficient impact on tax returns to require registration.”


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