Will the Courts Uphold IRS Efforts to License Tax Preparers?

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By AccountingWEB Staff

The IRS is confident that its initiatives to increase regulation of tax preparers will be found legal, despite challenges from opponents. 

Last week, IRS Commissioner Doug Shulman, said the new requirements were being implemented carefully and would "help smoke out unscrupulous preparers." The regulations in question would require certain preparers to pass a new competency test and complete fifteen hours of education each year.

"I'm very confident not only is everything we're doing going to be seen as legal, but more importantly, everything we're doing, I think, is going to benefit the American people", Shulman said at the National Press Club on April 5.

"It's a small number of people that are unscrupulous, but those are people that we need to make sure we're focused on so that taxpayers get good treatment", said Shulman. And, with roughly 60 percent of taxpayers now using paid preparers, the issue is significant.

Under a statute allowing the Treasury Department to regulate the work of representatives who come before it, the IRS has said it has the authority to implement its initiatives. "The IRS has always claimed, and the courts have always sustained, the right to govern who practices before it", said Sheldon Cohen, a former IRS commissioner. In an interview with The Wall Street Journal, Cohen said he thought the courts would be sympathetic with that argument. 

But Dan Alban, an attorney at the Institute for Justice, says that the IRS is trying to take hold of an authority to license tax preparers that Congress hasn't given it. He stated that the regulations "broaden [IRS] power beyond anything the statute authorizes."

Patricia Thompson, chair of the AICPA Tax Executive Committee, told members of the House Ways and Means Oversight Subcommittee at a hearing on July 28 that "the American Institute of Certified Public Accountants (AICPA) supports the IRS program, as it is currently structured, to regulate tax return preparers. We believe the IRS should be commended for its efforts to implement the return preparer program." Thompson said. "They listened to stakeholder concerns and suggestions, and they've gotten it right."

Thompson told the subcommittee",The AICPA supports the following elements of the IRS' regulatory program:

  • Registering paid tax return preparers and issuing them unique preparer tax identification numbers.
  • Expanding the ethical umbrella of IRS Circular 230 over all paid income tax preparers.
  • Creating a continuing education construct geared toward 'unenrolled' preparers.
  • Implementing a basic Form 1040 examination as a condition to become a 'registered tax return preparer.'"

However, AICPA Vice President of Taxation Ed Karl said that while he thought the IRS initiatives benefitted the government and the public, he could understand the resistance from certain preparers.

To learn more about the requirements the IRS has set forth, read the IRS Return Preparer Regulations Overview.

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