Stop losing sleep over your tax situation. I'm Darrin Mish — a tax attorney in Tampa who's spent 32 years handling exactly this kind of problem. Here's what you need to know.
A federal court judge made an unexpected ruling today regarding the regulation to monitor tax preparers. US District Judge James E. Boasberg ruled that the IRS has no jurisdiction to set up a program to license and regulate thousands of paid tax preparers in the country. According to Judge Boasberg, the IRS overstepped a law allowing it to regulate people who “advise and assist persons in presenting their cases” to the agency. Judge Boasberg’s opinion is that filing a tax return does not constitute “presenting a case” and therefore the IRS has no authority to regulate paid tax preparers.
Judge Boasberg made his ruling in a lawsuit brought by the libertarian Institute for Justice on behalf of Kilian, Sabina Loving, a bookkeeper who prepares 100 returns a year on the South Side of Chicago and John Gambino, a Certified Financial Planner who does about 50 tax returns for pay a year from Hoboken, New Jersey.
The IRS regulations are aimed at weeding out incompetent tax preparers and ensure greater professionalism in the industry. Every tax preparer in the country who charges a fee for his or her services has to be licensed to carry out their jobs. A Preparer Tax Identification Number (PTIN) is issued to every paid tax preparer upon payment of a fee of $64.25 (new) or $63.00 (renewal). Last year, 739,000 tax preparers applied for their PTINs.
In addition, to qualify to practice, tax preparers have to pass a competency test by the end of this year. However, CPAs, lawyers and enrolled agents are exempted because they have their own competency tests to pass as members of their professional associations. This ruling would apply to about 350,000 tax preparers.
Another requirement is for paid tax preparers to comply with 15 hours of continuous education classes a year. The bone of contention among individual tax preparers and smaller tax preparation firms is often the cost involved in complying with all these regulations. In the lawsuit before Judge Boasberg, the Institute for Justice argued that the cost of attending just the 15 hours of training would range between $675 and $1012, no small burden to individual and small firms preparing taxes. The only reprieve would be Congress’ decision to allow all who have not completed their 15 hours in 2012 to do so by end of 2013.
Judge Boasberg said that he would issue a permanent injunction to order a cessation to the IRS regulation program on tax preparers. The judge added that the injunction would likely help Killian and Gambino avoid closure of their tax businesses.
According to IRS spokesman Dean Patterson the agency had “no immediate comment’’ on the ruling. One option for the government is to request that Boasberg stay his injunction and make an appeal to the US Court of Appeals for the District of Columbia Circuit.
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