RTRP Test Fee Refunds

Post Date: 5/27/15
Last Updated: 5/27/15


Cross References
- www.irs.gov

The IRS has announced that it will refund the fee to tax preparers who took the Registered Tax Return Preparer (RTRP) test. This decision is a result of the ruling by the U.S. Court of Appeals for the District of Columbia Circuit that said the IRS lacks the authority to mandate competency testing for paid tax return preparers.

No action is necessary for tax preparers who took the test. Letter 5475, RTRP Refund Notification Letter, will be mailed approximately May 28, 2015, to people due an RTRP test refund, and refund checks will be mailed separately approximately June 2, 2015. Allow until August 2, 2015, to receive the refund before calling the IRS number on Letter 5475 to inquire about the refund.

No other expenses, such as the cost of continuing education, gas, travel, or hotel bills will be refunded. If the owner of a tax business paid the test fee for an employee who took the test, the refund will be paid to the person who took the test. Employers will have to resolve any reimbursement issues directly with the person who took the test.

Whether or not the refund is taxable to the recipient depends upon how the taxpayer treated the expense for the RTRP test. If a tax deduction was claimed as a business expense on Schedule C for the cost of taking the test, the taxpayer must treat the refund as other income on Schedule C for the recovery of items previously deducted. However, if all or part of the deduction in an earlier year did not reduce tax, the taxpayer can exclude the part that did not reduce tax. Attach a statement to the return with a computation showing how the exclusion was figured.

Tax preparers who received an RTRP Certificate can keep their certificate. However, the RTRP Certificate is no longer valid and serves no purpose when dealing with the IRS. Beginning January 1, 2016, tax preparers who are not attorneys, EAs, or CPAs, must participate in the Annual Filing Season Program in order to have limited representation rights for clients. Anyone who passed the RTRP test only needs to meet their original 15 hour continuing education requirement each year to obtain an Annual Filing Season Program—Record of Completion.
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