TaxByte 2016-27

Illinois Enacts Law to Oversee Tax Return Preparers

Illinois HB 5527, signed into law July 28, 2016, grants the Illinois Department of Revenue (DOR) authority to establish procedures requiring that the IRS PTIN number be included on Illinois income Tax returns or claims for refunds. The program, which is yet to be developed, will implement the PTIN program and identify high error rates and patterns of fraud and unsubstantiated basis for tax positions taken by tax return preparers.

In addition, the new law requires the DOR to establish communications with IRS to share and exchange PTIN information on income tax returns where fraud is suspected or when a tax preparer is disciplined or barred from filing tax returns with the IRS.

The law enacts a civil penalty for failure to provide the PTIN in the amount of $50.00 per offense, not to exceed $25,000 per year. The penalty can be waived if reasonable cause is determined. Tax preparers will have the option of a hearing upon notification of the penalty.

Under § 503 of the new law, if the tax return is prepared by a tax preparer for the taxpayer, that preparer shall sign the return and include his or her PTIN.  The law also addresses the signatures required on corporation, partnership and fiduciaries returns.  The law provides that when the taxpayer fails to sign a tax return and the DOR provides notice, within 30 days of the notice, the return will be deemed valid without a signature and any balance due will be assessed. 

The law becomes effective for taxable years on or after January 1, 2017, allowing time for the DOR to establish formal procedures. .