Skip to comments.IRS Loses Lawsuit Challenging Authority to Regulate Tax Preparers
Posted on 01/22/2013 5:55:26 AM PST by tired&retired
In a stunning blow to the Internal Revenue Services efforts to regulate the tax preparation profession, a federal judge struck down the IRSs licensing requirements for tax preparers on Friday, including testing and continuing education.
U.S. District Court Judge James E. Boasberg ruled against the IRS and in favor of the tax preparers in enjoining the agency against enforcing its Registered Tax Return Preparer requirements.
Todays ruling is a victory for hundreds of thousands of tax preparers across the country and the tens of millions of taxpayers who rely on them to prepare their taxes, said lead attorney Dan Alban. This was an unlawful power grab by one of the most powerful federal agencies and thankfully the court stopped the IRS dead in its tracks. The court ruled today that Congress never gave the IRS the authority to license tax preparers, and the IRS cant give itself that power.
The opinion is available online at: http://www.ij.org/images/pdf_folder/economic_liberty/irs_tax_preparers/irs-opinion-1-18-13.pdf.
Through these regulations, the IRS set itself up as king and sought to license hundreds of thousands of tax preparers without being authorized to so do under the law, said Institute for Justice senior attorney Scott Bullock. But as Judge Boasberg noted, under our system of law, statutory text is king.
Boasberg recognized that the IRS recently did a flip-flop with regard to its ability to license tax preparers, the Institute for Justice noted, declaring for years it did not have the authority to do so but only recently claiming that it did have that power.
They found that the IRS misinterpreted the statute and was basically trying to use it to expand its own authority in ways that the statute didnt authorize, said Alban. On the first page of the opinion, they said that the statutes text and context unambiguously foreclose the IRSs interpretation.
"With an invalid regulatory regime on the IRS's side of the scale and a threat to plaintiff's livelihood on the other, the balance of hardships tips strongly in favor of plaintiffs," Boasberg wrote later in the ruling.
WOW - there is so much significance here, and I don’t even think the plaintiffs or their attorneys even realize it.
This was not about the hardships for the tax preparers....the real victor here is the American taxpayer. This would have more or less turned all accountants into IRS agents. We would have effectively LOST OUR ADVOCATE in all of these proceedings. This would have been the end of property rights in a way had it gone the wrong way.
The fish rots from the head down.
Our Founding Fathers would have started shooting by now.
“We would have effectively LOST OUR ADVOCATE in all of these proceedings. This would have been the end of property rights in a way had it gone the wrong way.”
Very true. Under the new regulations it is questionable if a return preparer should represent a taxpayer in an audit due to the potential exposure to themselves. This potential conflict of interest for the preparer creates a situation where they must become their own advocate rather than their client’s advocate.
I have heard CPA’s tell of being threatened by IRS agents with preparer penalties if they did not cooperate.
Not only that....we might have lost the ability of even doing our own taxes via the software(which might have been cited as being “unlicensed” or one may be cited as being unlicensed should one had used the software) of these tax prep companies.
Since many folks do their own taxes, folks may have lost the ability to do our their taxes because they could be accused of being an unlicensed tax preparer, even of their own personal income tax returns. Oh there is great wickedness in what the IRS was trying to do!
I am not against increasing preparer standards as there were many fraudulent preparers who were ripping off the government and their clients.
The IRS is utilizing the gun control model of controlling tax return preparers. First create a registration program for preparers. Next charge an annual fee to have the privilege of preparing tax returns.
Finally, tighten the regulations so that preparer’s individual liability causes them to become defacto IRS agents or lose their right to prepare returns!
Since the IRS can’t even interpret their own regulations, why should they be licensing anybody?
Republicans could rebrand their postion on go9vernment if they would look at this story and clean out regualtions. Devide the government - again - by committees and then go on tours till they reduce the amount of regulations and thus the “workload” by 30% this will reduce the size of departments then lead to consolidations and again reduce the size ...might take 15 years but looka t how long it has taken to return liberal ideas from Carter to Obambi...30 years.
Over regulation takes a hit,it’s about time.
How about IRS agents get a certificate of competency issued by a private sector testing agency?
“why should they be licensing anybody?”
So they can charge an annual fee and control the actions of preparers.
You can’t control people who do not break the rules. If you keep increasing the regulations, everyone will eventually break the rules and be under the governments thumb of control.
Our Founding Fathers would have started shooting by now.
Clearly. But it is a different world today. The FedGov is far more powerful and the average person has far more to lose. But it continues to sour for the average person (globally) and eventually Gerald Celente’s prediction will come to pass: “When people lose everything and have nothing left to lose, they lose it.”
It is not about “if”. It is about “when”.
Judge James E. Boasberg is an odd creature at best.
Born in San Francisco, his father was part of Sargent Shriver’s Office of Economic Opportunity, a Great Society agency. He received an A.B. from Yale University in 1985, where he was a member of Skull and Bones.
Eleanor Holmes Norton recommended Boasberg to fill a judicial vacancy on the United States District Court for the District of Columbia. On June 17, 2010, President Barack Obama formally nominated Boasberg to the District Court for the District of Columbia.
(Importantly, the D.C. circuit is extremely influential, because they hear all cases involving the federal government. The Supreme Court rarely overturns them.)
That would be a hoot. I have had to deal with them too often for my liking and you get different answer depending on who you talk to.
“How about IRS agents get a certificate of competency issued by a private sector testing agency?”
I ran into this question recently in a tax appeal hearing. The government appraiser of a parcel of real estate was not required to be a licensed appraiser. The judge asked me to accept her as an expert witness and he hit the ceiling when I refused.
She appraised a property at more than double the price the property had been listed for sale to the public in a regional multi-list. She appraised the property at over $1.3 million when the property was open market listed at $600K on the effective date of the appraisal and did not sell. The for sale sign was evident in the front yard of the picture of the property she included in her appraisal submitted to the court. When I questioned her, she stated to the court that it was not relevant!
She never reconciled the comparative sale properties to the subject property in her appraisal.
She skipped the properties sold in the same development to utilize properties sold far away in a different part of the county as comparables.
She performed a retrospective appraisal and had no idea what a retrospective appraisal was. Followed none of the standards in performing one.
All this and the bureaucratic judge ruled against my appraisal by an independent certified appraiser. An appeal of his decision costs over $20K. The system is the punishment!
We need the same enforcement rules and standards to apply to the government employees!
Thank You, Judge Boasberg (and I apologize in advance for your lifetime of never-ending audits which is about to commence).
Indeed true, very good point.
Your last point is one reason we are switching to a smaller CPA firm, I think the one we used now has morphed into an IRS tool - perhaps due to threats.
Worst thing about it? I now fall under Circular 230 rules - the same exact standards of ethics and PENALTIES that a CPA or a lawyer is subject to.
Circ 230 is not to be trifled with if you play by the rules. In reality, it can be applied fairly subjectively - judges protect lawyers and CPA’s, but not every day preparers.
Yes, there is lots of fraud - but there are few signs that the IRS is working any more diligently to resolve them proactively than the INS is working to protect our borders.
Actually they go after CPA’s more than others as they have been held to a higher standard. Lawyers have been a target of the IRS for many years as they have been the largest group of non-filers(per the IRS).
I think that Circular 230 should apply to all paid preparers. CPA’s are still held to a higher standard due to their licensing regulations at the state government level and the additional ethical standards by their state CPA societies and the AICPA. I’m a retired CPA.
I had a problem with the minimal IRS audits performed in the last twenty years, compared to pre-1990. I saw the standards of care go down due to this and this was a major factor in my leaving the profession.
Congratulations on passing the return preparer test. If you want to grow within the profession, take the Enrolled Agent Exam. It’s not hard and gives you basically the same abilities as a CPA in handling tax matters before the IRS, without all the education requirements.
Just received this:
From the Desk of the Executive Director
As of Friday, Jan. 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education. The ruling does not affect the regulatory practice requirements for CPAs, attorneys, enrolled agents, enrolled retirement plan agents or enrolled actuaries.
Breaking News from the Return Preparer Office
We just finished a telephone conference with the Director of the Return Preparer Office in Washington, D.C. The call was rather short; however, it was to the point. In summary, here are the key statements
The ruling has been a setback to the RPO program
The IRS will stop scheduling RTRP exams by the end of today, January 22, 2013
The online PTIN system is currently not available
Continuing education for RTRPs is no longer mandatory, it’s voluntary
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