Legislative / Regulatory | Taxation

Court deals blow to IRS’s preparer registration process; CPAs unaffected

Well, this is interesting.

By now you've heard that a U.S. District Court has ruled that the IRS has no authority to regulate tax return preparers. (Or maybe you haven't. The news broke late on the Friday before the three-day Martin Luther King Jr. holiday weekend. The story didn't show up on a lot of radar screens until Tuesday morning).

The ruling caps a lawsuit filed by three independent tax return preparers who argued that they shouldn't have to comply with the IRS's tax return preparer registration program.

"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," the Journal of Accountancy reported. But the court ruled otherwise.

The IRS responded by shuttering its registration process, including the Preparer Tax Identification Number (PTIN) system -- at least temporarily.

"In accordance with this order, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education," the IRS announced. "... The Internal Revenue Service, working with the Department of Justice, continues to have confidence in the scope of its authority to administer this program. It is considering how best to address the court's order and will take further action shortly."

I'm guessing "take further action" means "appeal the ruling," but time will tell.

A couple of important things to note here:

  • Little, if any, of this applies to CPAs. "The ruling does not affect CPAs, enrolled agents and tax attorneys, who were exempted from the (registration process) as they are already regulated under Circular 230 requirements," Accounting Today's Michael Cohn wrote.
  • With the exception of CPAs, enrolled agents and attorneys, those who want to prepare returns in Maryland are still required to obtain a registration from the Maryland Board of Individual Tax Preparers. You'll find details here.

The MACPA will continue to monitor this issue and keep you posted on any developments. Stay tuned ...


Bill Sheridan