Explanation of Provisions

The IRS follows generally accepted accounting principles (GAAP) in calculating the full cost of administering PTIN applications and renewals. The Federal Accounting Standards Advisory Board (FASAB) is the body that establishes GAAP that apply for Federal reporting entities, such as the IRS. FASAB publishes the FASAB Handbook of Federal Accounting Standards and Other Pronouncements, as Amended (Current Handbook), available at https://files.fasab.gov/pdffiles/2024_FASAB%20Handbook.pdf . The Current Handbook includes the Statement of Federal Financial Accounting Standards (SFFAS) No. 4: Managerial Cost Accounting Standards and Concepts . SFFAS No. 4 establishes internal costing standards to accurately measure and manage the full cost of Federal programs, and the methodology below is in accordance with SFFAS No. 4 .

1. Cost Estimation of Direct Salary

The IRS uses various cost-measurement techniques to estimate the cost attributable to the program. These techniques include using various timekeeping systems to measure the time required to accomplish activities, or using information provided by subject-matter experts on the time devoted to a program. To determine the salary and benefits cost incurred to provide the service of providing a PTIN, the IRS estimated the number of full-time employees required to conduct activities related to the costs of issuing and renewing PTINs. The number of full-time employees is based on both current employment numbers and future hiring estimates. The IRS aggregated the hours spent by employees for performing each task, identified by cost center, related to the PTIN user fee, and calculated the percentage of time spent on the PTIN user fee based on a full-time schedule of 2,088 hours annually, with leave and training hours allocated to the resulting percentages based on employees’ tasks related to the PTIN user fee.

2. Overhead

When the indirect cost of a service or activity is not specifically identified from the cost accounting system, an overhead rate is added to the identifiable direct cost to arrive at full cost. Overhead is an indirect cost of operating an organization that is not specifically identifiable with an activity. Overhead includes costs of resources that are jointly or commonly consumed by one or more organizational unit’s activities but are not specifically identifiable to a single activity. These costs can include:

Financial, human resources, information technology, and general management and administrative.

Rent and building.

Procurement, other services, and consulting.

Property, plant, and equipment.

Publication services.

Research, analytical, statistical, library and legal services.

To calculate the overhead allocable to a service, the IRS applies an overhead rate to the identified direct salary and benefits and other direct costs. The overhead rate is the ratio of the IRS’s indirect salary, benefits, and non-salary costs of business divisions that do not interact with taxpayers to the salary and benefits costs of business divisions that interact with taxpayers. The IRS calculates an overhead rate annually. For the FY 2025 user fee review, an overhead rate of 62.92 percent was used.

3. Calculation of PTIN User Fee

The IRS used projections for FYs 2026 through 2028 to determine the direct and indirect costs associated with the PTIN program that are includible in the PTIN user fee calculation taking into account the Steele opinion. Direct costs are incurred by the Return Preparer Office and include staffing and contract-related costs for activities, processes, and procedures related to administering the PTIN program. Staffing costs included in the PTIN user fee calculation relate to the compliance activities of investigating ghost preparers; handling complaints regarding the improper use of a PTIN, use of a compromised PTIN, or use of a PTIN obtained through identity theft; and composing the data to refer those specific types of complaints to other IRS business units. The PTIN user fee also takes into account indirect costs for support activities related to the provision of PTINs and maintenance of the PTIN database. In accordance with Steele , the PTIN user fee calculation does not take into account compliance costs other than those described in this paragraph, costs incurred by the Suitability Department, support costs other than those described in this paragraph, and costs previously conceded by the government in Steele , as detailed earlier in this preamble.

The salary and benefits for the work performed related to the PTIN program is projected to be $17,555,984 in total over FYs 2026 through 2028. In addition to salary and benefits and overhead expenses, the IRS projects incurring travel, training, and supplies costs of $63,579 in each of FYs 2026 through 2028. The total salary and benefits, travel, training, and supplies, and overhead expenses projected are shown below:

Expense FY 2026 FY 2027 FY 2028 Total Salary and benefits $5,693,975 $5,850,559 $6,011,450 $17,555,984 Travel, training, and supplies $63,579 $63,579 $63,579 $190,737 Overhead (62.92 percent) $3,582,649 $3,681,172 $3,782,404 $11,046,225

The total cost for FYs 2026 through 2028 is therefore projected to be $28,792,946. The number of users is based on FY 2024 numbers adjusted by a projected increase in applications in FYs 2026, 2027, and 2028. Dividing this total cost by the projected population of users for FYs 2026 through 2028 results in a cost per application or application for renewal of $10 as follows: $28,792,946 (total cost) ÷ 2,829,524 (number of applications) = $10.18 (cost per application or application for renewal).

Taking into account the full amount of these costs, the amount of the PTIN user fee per application or application for renewal is $10.

Costs related to a third-party contractor’s activities for the issuance, renewal, and maintenance of PTINs, such as processing applications and operating a call center, are included in the PTIN user fee calculation, in accordance with Steele . This amount is currently set at $8.75 per application or application for renewal. The third-party contractor was chosen through a competitive bidding process. The amount of the third-party contractor portion may change in 2026 when the contract expires and will be re-computed.