The IRS Preparer Competency Exam – Now What?

By John Ams posted 12-01-2011 09:21 AM

The IRS has just announced that preparers wanting to become IRS “Registered Tax Return Prepares” may begin taking the exam right now.  What should you do – and what should you know – before you take the exam?

Let’s first mention what we know.   The exam will be 2.5 hours long and cover 120 questions.  Form 1040, the 1040 instructions and Pub 17 will be available at the test center only online (you cannot bring your own copy with you).  A handheld calculator will also be provided.  Pass/fail information will be available immediately except for the first 2,400 exam takers.  The IRS will use these first exams to validate the test questions, so results will not be available for some weeks following the test.  

How should someone prepare?  
  • Recommendation:  Since the answers will be in either format, make sure you are not intimidated by the multiple choice or true/false test format. 
Beginning on December 16, 2011 NSA will be offering a FREE web-based tutorial to help you brush up on what you need to know to take this kind of examination.  Also, the IRS has posted two useful pieces of administration:
1. a video on “What to Expect on Test Day”  
2. an online sample test to demonstrate how an online test works at

  • Recommendation:  Take the exam in April or May, not now.
The exam available now is based on the 2010 Internal Revenue Code (except for any Circular 230 questions which are based on the regulations released on August 2, 2011). The IRS will update the tax law on which the exam is based in early April so that the exam available after April 15 will be the 2011 Code – the very same Code preparers will be working with for hours and hours during the upcoming tax season.  In other words, if you prepare a number for Form 1040 returns during tax season you will also be taking a cram course on the tax content in the exam.  Why not take the exam right after that tax season cram course?

Review the sample “test” in the link above.  You will see there are five sample questions.  If you prepare even a small number of 1040s you will likely have to answer similar questions for your clients a number of times.  Again, you will be studying for the exam based on current law (not the 2010 Code) while earning money by preparing returns.  Take the exam after tax season.

Preparers have until December 31, 2013 to successfully complete the test. However, if you simply want to take the exam to get it over with, NSA already offers a study course that can serve as a primary study guide or as a supplement to information you may already have. Click here to learn more and purchase the course

  • Recommendation:  Know the Code, not software.
The IRS Preparer Office is interested in whether preparers know the Code rather than how to merely input information into tax software.  So, when you are preparing tax returns during the upcoming filing season, take note of whether there is a limit on some deductions (example:  charitable contributions), whether some items are only deductible above a certain percentage (example:  medical expenses) or how to compute basis on a home purchase.

Some NSA members who are older and have been tax professionals for some years are upset about the exam, and understandably so.  However, as a group they are likely better equipped to take the exam than others.  Why?  Because they started preparing returns before tax software claimed to make everyone a tax expert.  Many started by doing 1040s by hand and probably know more about deductions, credits, limits than they care to admit.  Moreover, they know where a particular number is supposed to be entered on a return and whether that number should be adjusted based on limits or other adjustments required by the Code.  To remind yourself that you are in this knowledgeable group, just look at the IRS’s five sample questions on online test taking. 

To summarize, make sure you familiarize yourself with the test format, what you can/cannot bring to the test center, and plan to take the exam right after tax season, when you have “practiced” for the exam by actually preparing returns.

I am confident you will do just fine on the exam.

Lastly, if you're looking for answers about the RTRP exam, PTINs or CPE for RTRPs, make sure you bookmark  - a webpage dedicated to Registered Tax Return Preparer exam prep and resources, including a free testing taking skills tutorial and step by step clarification of IRS requirements.  

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