Taxpayer Protection and Preparer Proficiency Act
- Sponsor
- Rep. Panetta, Jimmy [D-CA-19]
- Committees
- Ways and Means Committee (primary)
- Last action
- Nov 28, 2025
Bottom line
The bill aims to enhance taxpayer protection and the integrity of the tax system by strengthening IRS oversight and enforcement capabilities over tax return preparers through increased penalties and a new regulatory framework for preparer identification numbers.
What it actually does
This bill amends the Internal Revenue Code of 1986 to significantly increase penalties for tax return preparers who fail to comply with identification number requirements, misuse identifying numbers, or misappropriate taxpayer refunds. It establishes a new comprehensive program for the Internal Revenue Service (IRS) to regulate preparer tax identification numbers (PTINs), including suitability and education requirements for non-credentialed preparers, and grants the Secretary of the Treasury authority to deny, suspend, or revoke PTINs. The bill also creates a new criminal penalty for willful misuse of identifying numbers and mandates IRS programs to prevent inadvertent errors and publicly disclose preparer misconduct.
Proponents argue
Supporters argue that the bill is crucial for safeguarding taxpayers from fraudulent and incompetent preparers, thereby enhancing the overall integrity of the tax system. They contend that establishing clear suitability and education standards for all paid preparers, coupled with robust enforcement mechanisms, will ensure that individuals who prepare taxes for compensation meet essential levels of proficiency and ethical conduct, ultimately reducing tax fraud and errors.
Opponents contend
Critics might argue that the substantial increase in penalties and the new regulatory burdens, particularly the suitability and education requirements for non-credentialed preparers, could disproportionately affect small tax preparation businesses and individual preparers. They may contend that these measures could lead to higher compliance costs for preparers, which might be passed on to taxpayers through increased fees, or could limit access to affordable tax preparation services, especially for low-income individuals.
The bill is moderately complex due to its technical amendments to the Internal Revenue Code and the detailed establishment of new regulatory programs, but its length makes it manageable for a dedicated reader to understand its core provisions within a reasonable timeframe.
Section 2
Expanded Definition of 'Return' for Preparer Penalties
This provision expands the definition of 'return' for purposes of applying tax return preparer penalties. It now explicitly includes administrative adjustment requests under section 6227 and partnership adjustment tracking reports under section 6226(b)(4)(A), in addition to traditional tax returns. This ensures that preparers of these specific partnership-related documents are subject to the same penalty rules as preparers of other tax returns.
Supporters argue
Supporters argue this amendment closes a potential loophole, ensuring consistency in applying preparer penalties across all significant tax-related documents, thereby enhancing the integrity of tax administration for partnerships.
Critics contend
No specific opposition is typically raised against this provision, as it is a technical clarification to ensure comprehensive application of existing penalty rules.
Tradeoffs
This provision primarily aims to ensure comprehensive application of existing rules, with no apparent significant tradeoffs.
Section 3(a)
Increased Penalties for Invalid or Missing Preparer Identifying Numbers
This section significantly increases the penalty for tax return preparers who fail to furnish a valid identifying number (PTIN) on a return or claim for refund. The penalty per failure rises from $50 to $250, and the maximum annual penalty increases from $25,000 to $75,000. It also explicitly defines what constitutes an 'invalid' identifying number, including numbers assigned to another person, inactive, expired, withdrawn, suspended, or revoked numbers.
Section 3(a)(3)
New Penalty for Misuse of Electronic Filing Identification Numbers (EFINs)
This provision establishes a new $250 penalty for electronic return originators (EROs) who fail to use an electronic filing identification number (EFIN) that is specifically assigned to them by the Secretary. An exception is provided for failures due to reasonable cause and not willful neglect. The section also defines 'electronic return originator' and 'electronic filing identification number,' clarifying that suspended or revoked EFINs are considered invalid for use.
Section 3(d)
New Criminal Penalty for Willful Misuse of Identifying Numbers
This section creates a new felony offense for tax return preparers who willfully engage in misconduct related to identifying numbers. Specifically, it criminalizes willfully failing to furnish a valid preparer tax identification number (PTIN) with intent to evade requirements, willfully furnishing an invalid PTIN, or willfully furnishing a PTIN assigned to another person. Convictions can result in fines of up to $50,000 ($100,000 for corporations), imprisonment for up to 2 years, or both.
Section 4(a)
Increased Penalties for Various Preparer Failures
This section substantially increases the monetary penalties for several existing preparer failures under section 6695. For instance, the penalty for failing to furnish a copy of a return to the taxpayer, failing to sign a return, or failing to retain copies of returns increases from $50 to $250 per failure. The maximum annual penalties for these failures also increase significantly. Additionally, the penalty for failing to be diligent in determining eligibility for the Earned Income Tax Credit (EITC) increases from $500 to $1,000.
Section 4(b)
Enhanced Penalties for Misappropriation of Refunds
This provision amends section 6695(f) to explicitly penalize tax return preparers who misappropriate any refund (or advance payment of a refundable credit) issued to a taxpayer through an electronic funds transfer. The penalty for such misappropriation is set at the greater of $1,000 or the full amount of the misappropriated transfer. The section also retains and clarifies the penalty for preparers who endorse or negotiate a taxpayer's refund check, with an exception for bank deposits into the taxpayer's account.
Section 5(a)
Establishment of Preparer Tax Identification Number (PTIN) Program
This section establishes a comprehensive program for the administration of Preparer Tax Identification Numbers (PTINs). It requires individuals (unless they are 'specified practitioners' like CPAs, attorneys, or enrolled agents) to meet suitability requirements (including background checks and personal tax compliance) and education requirements (specified hours on ethics, professional responsibility, and tax law) before a PTIN is assigned or renewed. It also allows for an exemption if an individual maintains a valid state license or registration with comparable examination, education, and background check requirements.
Section 5(a)
Authority to Suspend or Revoke PTINs and Impose Monetary Penalties
This provision grants the Secretary of the Treasury explicit authority to suspend or revoke a preparer tax identification number (PTIN) if a tax return preparer fails to meet suitability or education requirements, is deemed incompetent (e.g., repeated errors), is disreputable (e.g., false information, tax non-compliance, criminal conviction, certain penalties), violates professional regulations, or willfully misleads taxpayers. The Secretary can also impose monetary penalties (up to $1,000 or $5,000 for fraud, adjusted for inflation) in addition to or in lieu of suspension/revocation. It also includes authority for preliminary suspensions (up to 180 days) in cases of serious economic harm or impairment of tax administration.
Section 5(e)
PTIN Requirement and Penalty for Offer-in-Compromise Preparers
This provision extends the requirement to include an identifying number to any person who prepares an offer-in-compromise (OIC) for compensation. It establishes a new penalty of $250 per failure (with a maximum annual penalty of $75,000, both adjusted for inflation) for failing to furnish a valid identifying number on an OIC, with an exception for reasonable cause. The definition of an invalid identifying number is consistent with other preparer provisions.
This provision creates an exception to the requirement for a tax return preparer to furnish their identifying number. It states that the requirement does not apply if the preparer is employed by a 'specified practitioner' (a CPA, attorney, or enrolled agent in good standing) and is under the supervision and direction of a specified practitioner who includes their own identifying number, signs the return, and is a specified practitioner.
Section 6109(a)(4)(B) (as amended by Section 5(a)(1))
Why it matters:This is standard legislative practice for defining exceptions to a general rule. It allows for practical operational models in larger tax firms where credentialed professionals oversee the work of multiple preparers.
Case for: Proponents argue this exception allows credentialed professionals to effectively supervise and delegate work, potentially increasing efficiency and access to tax preparation services while maintaining professional oversight and accountability through the supervising practitioner.
Case against: Critics might argue that this provision could create a potential loophole where less qualified individuals can prepare returns without direct individual PTIN accountability, relying solely on the supervisor's credential, which might dilute the overall goal of ensuring individual preparer proficiency.
Estimated impact: This could affect a significant portion of the non-credentialed preparer workforce, allowing them to operate under the umbrella of a credentialed professional without needing to meet the individual PTIN suitability and education requirements themselves, provided they are properly supervised.
This clause clarifies how the Secretary determines if a State licensing or registration program's requirements are 'comparable' to the federal suitability and education requirements for PTIN exemption. It specifies that this determination shall be made 'without regard to whether such requirements were included in such program at the time that such individual was licensed or registered under such program,' but rather based on whether 'such requirements are, as of the date that such individual requested assignment or renewal of a preparer tax identification number under this subsection, presently included in such program.'
Section 6109(e)(4)(B) (as amended by Section 5(a)(2))
Why it matters:This is a technical provision designed to ensure the smooth and fair administration of the PTIN program, particularly regarding how state program comparability is assessed over time. It prevents individuals from being penalized if their state's program has evolved since their initial licensure.
Case for: Proponents argue this clarification provides necessary flexibility for states to update their preparer oversight programs while ensuring that existing licensees can still qualify for the federal PTIN exemption if their state's *current* program meets federal standards. It prevents penalizing individuals for past state program deficiencies.
Case against: No strong case against this provision, as it is an administrative detail aimed at ensuring fairness and practicality in the implementation of the PTIN program.
Estimated impact: This provision impacts how many state-licensed preparers will be exempt from the federal PTIN education and suitability requirements, potentially affecting a significant number of preparers in states with evolving regulatory frameworks.