IRS Loses Bid to Mandate Continuing Ed for Tax Preparers

While CPAs and tax attorneys must currently meet professional standards for tax preparation and other services, a recent decision by the U.S. Court of Appeals for the District of Columbia has ruled that the IRS has no authority to force continuing education or similar standards on tax preparers.  The case stems from a 2011 IRS proposal of a system that would have established tax preparer registration and required all those who were paid for their services to pursue continuing education and submit to competency testing.  The reason for federal oversight provided by the IRS included the claim that too many tax preparers were of limited skill, submitted error-laden filings and that taxpayers needed protection from being swindled for such marginal services. 

In 2012, three tax preparers filed a federal lawsuit challenging the implementation of the plan (Loving vs. IRS).    Tax preparers claimed that such regulations would put countless small businesses and sole proprietors out of work, while the added costs of education would be passed down to millions of taxpayers, forcing them to forgo the service and attempt their own returns. 

The IRS lost the original case, appealed and lost again.  The thrust of the IRS’ argument was that tax preparers are “representatives” or agents of the taxpayer and therefore, subject to IRS oversight.  The unanimous decision by the three-judge panel clearly stated, “The tax-return preparer certainly assists the taxpayer, but the tax-return preparer does not represent the taxpayer.”  The decision also called the IRS’ move to institute such a regulatory program an attempt to, “unilaterally expand its authority.”  For the full story and the remaining strategic options for the IRS, visit the blog, Don’t Mess with Taxes.