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Thursday, June 13, 2024 | Back issues
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IRS Loses Another Battle With Solo Tax Preparers

WASHINGTON (CN) - A federal judge who blocked the regulation of nonattorney, uncertified preparers of tax returns refused to stay his injunction pending appeal.

The Internal Revenue Service has long regulated lawyers, certified public accountants and other tax professional, but private, non-attorney tax preparers remained outside its statutory reach.

This changed in 2011 when the IRS adopted new rules requiring such tax preparers to pass a qualifying exam, pay an annual application fee and take 15 hours of continuing-education courses each year.

The regulations defined a tax-return preparer as a person who "prepares for compensation or who employees one or more persons to prepare for compensation, all or a substantial portion of any return of tax or any claim for refund of tax under the Internal Revenue Code."

U.S. District Judge James Boasberg said that the IRS has estimated its "new rule sweeps in 600,000 to 700,000 new tax-return preparers who were previously unregulated at the federal level."

"Agency action, however, requires statutory authority," he added.

Claiming that the agency had no such authority, Sabina Loving and two other independent tax preparers filed suit.

Boasberg enjoined the law and granted the tax preparers summary judgment last month. He refused Friday to stay that order pending the IRS' appeal to the D.C. Circuit.

"The court will, however, modify the injunction to make clear that its requirements are less burdensome than the IRS claims," he wrote.

Boasberg insisted that his ruling did not affect an IRS requirement that tax-return preparers must obtain a preparer tax-identification number (PTIN). "Indeed, Congress has specifically authorized the PTIN scheme by statute," the new order states. "That scheme, therefore, does not fall within the scope of the injunction and may proceed as promulgated, except that the IRS may no longer condition PTIN eligibility on being 'authorized to practice' under 31 U.S.C. § 330."

"What plaintiffs do challenge - and what the court has enjoined - are the requirements that tax-return preparers (who are not attorneys, CPAs, enrolled agents, or enrolled actuaries) must pay some fees unrelated to the PTIN, pass a qualifying exam, and complete annual continuing-education requirements," Boasberg added.

The judge modified the injunction "to make clear that the IRS is not required to suspend its PTIN program, nor is it required to shut down all of its testing and continuing-education centers; instead, they may remain, but no tax-return preparer may be required to pay testing or continuing-education fees or to complete any testing or continuing education unless and until this injunction is stayed or vacated by the Court of Appeals."

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