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Tax Certification Ruling

IRS To Appeal Tax Certification Ruling

The federal appeals court in Washington, DC, has set September 24 to hear oral arguments in the lawsuit to prevent the Internal Revenue Service from testing, certifying, and regulating professional tax preparers.

A priority of former IRS Commissioner Doug Shulman, the regulation of tax preparers was scheduled to go into effect last year.  The Registered Tax Return Preparers (RTRP) program could have imposed testing, continuing education, and registration requirements on preparers, even though the agency itself has said for years that it did not have the legal authority to impose such regulation.

Shulman saw the RTRP program as a means to curb a rise in unprofessional and fraudulent activities among some tax preparers, and pushed it forward.  The program did not include requirements for CPAs, Enrolled Agents, and tax attorneys, already regulated under Circular 230.

Three tax preparers—Sabina Loving of Chicago, IL, John Gambino of Hoboken, NJ, and Elmer Kilian of Eagle, WI –filed suit against the IRS, and in February won their case to invalidate the program.  They won again when a federal appeals court in Washington refused to lift the injunction and permit the IRS to move forward with its plans until they could appeal.

U.S. District Court Judge James E. Boasberg ruled that the IRS did not have the authority to regulate preparers.  The judge subsequently clarified his ruling, stating that the IRS could continue its Preparer Tax Identification Number (PTIN) registration system for tax preparers. The judge also clarified that tax preparers could take competency tests and continuing education courses on a voluntary basis, but they would not be required to do so while his injunction remained in place.

In the meantime, the IRS has continued its efforts to identify and prosecute fraudulent preparers, in part to bolster their claim that the industry needs to be regulated.

There has been some discussion in Congress of passing legislation to give the IRS such regulatory authority over tax preparers, but it is unlikely that this will happen before the September 24 court date.  If that is the case, the IRS will likely lose again on appeal.

 

Source:  Accounting Today

 

 

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