Lawsuit Charges IRS with "Power Grab" in New Tax Preparer Regulations

By Anne Rosivach
 
The Institute for Justice (IJ) has filed suit against the IRS on behalf of three independent, paid tax return preparers, challenging the service's authority to license and regulate paid tax preparers. The IRS instituted new requirements for paid tax preparers last year. The new regulations will be phased in over a three-year period.
 
The suit, filed in federal district court for the District of Columbia, also argues that the new rules reduce competition, citing the support for the regulations that came from large organizations, such as the American Institute of Certified Public Accountants (AICPA) and H&R Block. 
 

"Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power," said Attorney Dan Alban of the IJ, a libertarian public interest law firm that advocates for the rights of entrepreneurs.
The three individual tax return preparers – Sabina Loving of Chicago, Illinois; John Gambino of Hoboken, New Jersey; and Elmer Kilian of Eagle, Wisconsin – are claiming that the government is preventing them from doing business as they have for years and is imposing burdensome costs on them.
 
In a speech before the AICPA in 2011, IRS Commissioner Douglas Shulman said that the return-preparer regulations were designed to improve compliance and limit tax fraud. 
 
The new regulations currently require all paid tax preparers to obtain a Paid Tax Preparer Number (PTIN), which carries a fee of $63. Over the next two years, certain return preparers must also complete fifteen hours of continuing education annually; pass the one-time competency test by December 31, 2013; and pass a tax compliance check. The test can be taken at more than 260 sites for a fee of $116. 
 
Some paid tax preparers have already taken the test, and the IRS has begun providing test results. Those individuals passing both the test and the tax compliance check will be sent a Registered Tax Return Preparer certificate. 
 
With the exception of obtaining their PTIN, CPAs, attorneys, and enrolled agents are exempt from the new regulations; all have passed exams and most are subject to continuing education requirements.
 
Edward Karl, vice president for taxation at the AICPA, said accountants and other professionals already have extensive testing and continuing education standards. According to Bloomberg, Karl said, "I do understand why folks who have done this for years and feel that they're competent don't want to change."  
 
National Taxpayer Advocate Nina Olson said she has advocated standards for paid tax-return preparers since 2002, Bloomberg reported. "My own experience in private practice – bolstered by 'shopping visits' conducted by the Government Accountability Office, the Treasury Inspector General for Tax Administration, and others - found that there are pervasive problems in terms of return accuracy and ethics that registration, testing, and continuing education will help address."
 
Related articles:

You may like these other stories...

Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.