Federal Court Rules Against IRS Regulation of Tax Preparers — Journal of Accountancy

The United States District Court for the District of Columbia on Friday struck down the IRS’s registered tax return preparer program and enjoined it from enforcing the regulations

Alistair M. Nevius at the Journal of Accountancy reports that a federal district court has struck down the Internal Revenue Service’s registered tax return preparer program as exceeding the IRS’ statutory authority. The court granted summary judgment to three tax return preparers who had sued, claiming they would lose revenue and perhaps be forced out of business by the rules. The court enjoined the IRS from enforcing the regulations:

The United States District Court for the District of Columbia on Friday struck down the IRS’s registered tax return preparer program and enjoined it from enforcing the regulations (Loving, No. 12-385 (D.D.C. 1/18/13)).

The IRS in 2011 began regulating all tax return preparers who prepare and file tax returns for compensation. In May 2011, it issued final regulations (T.D. 9527) making unenrolled return preparers (i.e., return preparers who are not CPAs, attorneys, or enrolled agents) subject to Circular 230 for the first time and requiring them to pass a qualifying exam, pay an annual fee, and take 15 hours of continuing education courses each year.

The IRS argued that its regulation of tax return preparers is permitted under 31 U.S.C. Section 330, which allows the IRS to regulate “representatives” who “practice” before it.

Three independent tax return preparers brought suit in federal court, arguing that they are not covered by the statute and that the IRS has no authority to regulate their preparation of tax returns. They complained that they would have to raise prices and would lose customers if forced to comply with the IRS’s program. Two claimed they would likely close their businesses if forced to comply. They sought injunctive and declaratory relief and moved for summary judgment.

Read about the tests the court applied and the decision it came to in the full piece here. 

The United States District Court for the District of Columbia on Friday struck down the IRS’s registered tax return preparer program and enjoined it from enforcing the regulations