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IRS Lacks Authority to Regulate Paid Tax Preparers
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During 2009, the IRS Commissioner Doug Shulman conducted a 6-month background study on Tax Preparer Standards. Input was obtained from all segments of tax industry participants to develop “uniform and high ethical standards of conduct for tax preparers” as a way to increase tax compliance and reduce the “tax gap.”

Bloomberg News reported that crooked preparers have been known to falsify information and to claim refundable tax credits for their clients, typically by manipulating taxpayer income, expenses and dependents. The IRS issued new rules in 2011 to address concerns about the performance of some preparers.


A federal appeals panel said the U.S. Internal Revenue Service lacks authority to regulate paid tax preparers upholding a lower-court ruling and throwing out licensing rules for as many as 700,000 practitioners.

The IRS required that paid preparers pass a certification exam, pay annual fees and complete at least 15 hours of education courses annually. The rules imposed standards on preparers who are not certified public accountants, attorneys or enrolled agents already licensed to practice before the IRS.

According to The Income Tax School, the official statements from the IRS are as follows; “On Friday, Jan. 18, 2013, the United States District Court for the District of Columbia 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 required 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.

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On Friday, Feb. 1, the court modified its order to clarify that the order does not affect the requirement for all paid tax return preparers to obtain a preparer tax identification number (PTIN). Consistent with this modification, the IRS has reopened the online PTIN system.

We remain confident in our legal authority and committed to protecting taxpayers through implementing reasonable standards in the tax preparation area. Our appeal of the district court opinion was filed on Mar. 29, 2013.”

Accountants and tax preparation companies such as the nation’s largest tax preparer, H&R Block Inc. supported the regulation. Dan Alban, of the Libertarian Institute for Justice in Arlington, Virginia, called this a major victory, saying that this is about the freedom to choose your tax preparers. Taxpayers get to choose, not the IRS.” According to the L.A. Times, a spokeswoman Julianne Breitbeil said, “It’s critical for taxpayers to be able to rely on quality work from tax preparers.”

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