IRS Loses Lawsuit Challenging Authority to Regulate Tax Preparers

Accounting Today ^ | JANUARY 18, 2013 | MICHAEL COHN

[tired&retired]

In a stunning blow to the Internal Revenue Service’s efforts to regulate the tax preparation profession, a federal judge struck down the IRS’s 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.

“Today’s 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 can’t 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 didn’t authorize,” said Alban. “On the first page of the opinion, they said that ‘the statute’s text and context unambiguously foreclose the IRS’s 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.

[tired&retired]

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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