In this article, I will walk through the tax implications that result when a shareholder of an S Corporation withdraws inventory from the business for personal use. Because a withdrawal of inventory from the business by the shareholder represents a transfer of value from the business to the owner, we view this transaction as a shareholder distribution. The below analysis...Read more...
What is the Annual Filing Season Program (AFSP)?
A Guide for Tax Professionals
The Annual Filing Season Program (“AFSP”) is a new voluntary program offered by the IRS that is administered through IRS Approved Continuing Education Providers and is available to all tax professionals. The AFSP credential is effectively a new tax designation that provides a simple way for tax preparers to distinguish themselves among tax preparers.
The benefits and requirements of the Annual Filing Season Program are similar to the former mandatory Registered Tax Return Preparer program, except that the program is completely voluntary and the requirements are generally less difficult and costly for tax preparers (see below). Due to the IRS being enjoined against enforcing their regulation of the tax preparer industry, the IRS has decided to implement this new program as an alternative means for tax preparers to distinguish themselves as professionals who meet minimum requirements of proficiency in the tax system and complete adequate continuing education in order to stay on top of the ever-changing tax system.
What's the Difference between the RTRP program and the AFSP?
With all the recent changes implemented by the IRS in relation to tax preparers in the last few tax seasons, there have been quite a few new acronyms to get to know -- PTIN, RTRP, and now, AFSP. The difference between a Registered Tax Return Preparer (RTRP) certification and the new Annual Filing Season Program credential is the most confusing. Before the IRS was enjoined against compulsory regulation of tax preparers, the IRS required all tax preparers without other certifications to obtain and maintain the RTRP designation in order to continue preparing tax returns. This requirement was the result of the IRS’s effort to weed out the unscrupulous and incompetent professionals among the industry. However, such efforts were struck down by a D.C. District court as a move that exceeded the scope of the IRS's authority in a ruling that was upheld on appeal. Obtaining an RTRP designation required taking an exam on-location at one of the nationwide Prometric testing centers.
On the other hand, the AFSP is a new accreditation program available to all tax professionals on a voluntary basis. Although tax preparers are not required to obtain the AFSP designation, there are plenty of benefits for doing so (see below). Obtaining an AFSP credential involves a much simpler process than the RTRP designation previously did. Rather than take an exam on-location at a Prometric testing center, non-exempt tax professionals obtaining the AFSP credential must complete an Annual Federal Tax Filing Season Refresher Course (“AFTR”), which can all be done through an IRS Approved Provider—for example, Fuller Professional Education’s AFTR course can be completed online without leaving your home or office for less than the cost of the RTRP exam (see What is an AFTR Course?). Once the tax professional completes the AFTR Course and fulfills the other continuing education requirements (see How to Obtain the AFSP Credential: A Guide for Tax Pros), the tax professional will qualify to download/print their Record of Completion using their online PTIN account and will for that tax filing season bear the AFSP credential and designation.
What are the benefits of obtaining the AFSP Credential?
There are three primary benefits to tax preparers who complete the requirements to obtain the AFSP credential each year. The first benefit is that tax preparers with their certification will be included in a public database listing all PTIN holders with certifications and professional designations related to the tax preparation industry. This database will include several professional designations, including those with the AFSP credential.
The second benefit is that tax preparers with the AFSP credential will be able to represent their clients before the IRS in matters related to professional tax returns they prepare on behalf of such clients. Although the IRS has previously afforded this privilege to all tax preparers, they will no longer do so for tax preparers who do not have the AFSP after December 31st, 2015. Enrolled Agents, CPAs, and attorneys, however, will continue to have unlimited rights to representation before the IRS.
The most obvious benefit is that the AFSP is an official designation instituted by the IRS, and tax professionals who obtain the AFSP credential each year will be able to certify to prospective clients that they have successfully obtained the AFSP designation, similar to how an Enrolled Agent or CPA would. This effectively sets the tax professional apart from others in the market and aid the tax preparer in securing and retaining clients. Additionally, the IRS has expressed plans to encourage taxpayers to engage professionals with an AFSP or other designation for tax services by educating taxpayers on how the Annual Filing Season Program and other continuing education programs help tax professionals to maintain their proficiency in the tax system and provide competent tax-related services.
 - See IRS News Article, “New IRS Filing Season Program Unveiled for Tax Return Preparers”, IR-2014-75, Link .
 - i.e. an Enrolled Agent, Certified Public Accountant, or attorney certification.
 - See Loving v. IRS, 742 F.3d 1013 (D.C. Cir., 2014), Link .
 - For a discussion of the difference between exempt and non-exempt tax professionals for purposes of the AFSP designation, see How to Obtain an Annual Filing Season Program (AFSP): A Guide for Tax Pros.
 - Tax Professionals with active PTINs and the following designations will be included in the listings of this database: Annual Filing Season Program, Registered Tax Return Preparers, Enrolled Agents, Certified Public Accountants, Attorneys, Enrolled Retirement Plan Agents, and Enrolled Actuaries.
 - The limitations on how AFSPs would advertise their status will almost certainly be similar to an Enrolled Agent or Registered Tax Return Preparer in that they will not be able to claim or imply that they’re in any way endorsed by the IRS.
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