The chairman of the House Ways and Means Committee’s Oversight Subcommittee is asking the Internal Revenue Service why its Web site continues to provide confusing information about the IRS’s recently invalidated tax preparer regulation requirements.
Charles Boustany
Earlier this month, the U.S. District Court for the District of Columbia ruled that the Internal Revenue Service had overstepped its authority by requiring all paid preparers to register with the IRS and provide for competency testing under its Registered Tax Return Preparer Program (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers).
With the 2013 tax filing season having just gotten underway this week, Oversight Subcommittee Chairman Charles Boustany Jr., M.D., R-La., wrote a letter to IRS Acting Commissioner Steven T. Miller regarding concerns that the ruling and subsequent lack of guidance could be causing serious and unnecessary confusion for taxpayers. Boustany pointed to the IRS Web site and indicated that it contained multiple references that read as if the invalidated preparer requirements remain in force.
He noted that the IRS.gov home page provides a link entitled, “Statement on Court Ruling Related to Return Preparers.”
“However, unless a taxpayer is already aware of the court decision, there is no other notice on the Web site to indicate that the return preparer program has been changed in any way,” Boustany wrote. “To the contrary, the tax return preparer FAQs (Frequently Asked Questions), also available on your agency’s Web site, read as if the invalidated preparer requirements remain in force, including the need for preparers to obtain and use a preparer identification number. This anomaly—between the injunction and the apparent direction to continue with the program—would seem likely to cause serious confusion among affected preparers. For these reasons, it is necessary that both taxpayers and return preparers be given clear and immediate guidance so as to avoid disruption to the 2013 filing season.”
To ensure the IRS is minimizing confusion and taking the appropriate steps to deal with the effects of the U.S. District Court’s decision, Boustany requested the IRS to detail how it plans to inform taxpayers of this change and whether any adjustments were needed for the 2013 tax filing season.
“As you know, an estimated 60 percent of taxpayers pay a professional to prepare their federal income tax returns,” he noted. “With the 2013 tax-filing season underway, it is unclear how the suspension of the program will impact taxpayers that rely on paid preparers, and the preparers themselves that rely on the income from tax preparation. Given the extensive marketing and outreach efforts to promote the program, it is critical for taxpayers and preparers to be apprised of how the January 18 court decision affects them.”
Boustany asked the IRS whether it had conducted any outreach to taxpayers and others affected by the tax return preparer requirements, and whether the IRS plans to make changes to its Web site to reflect the change in requirements and explain to taxpayers and preparers the proper protocol for this filing season.
He also asked whether the IRS anticipates that the suspension of the program would have an impact on tax administration this filing season and whether the IRS has made any adjustments to its 2013 tax filing season plans to accommodate more taxpayer inquiries on the topic. Boustany also wants to know whether all paid preparers, registered and unregistered, can properly sign and file tax returns, and if they need to include a Preparer Tax Identification Number, or PTIN, on the return. He asked whether the IRS has suspended the issuance of PTINs and whether the IRS website will be updated to reflect the new requirements. Boustany also asked the IRS whether paid tax return preparers who met the competency and filing requirements prior to the court’s decision date would be permitted to continue using the Registered Tax Return Preparer credential.
Court Filings
The IRS has asked U.S. District Court Judge James Boasberg to suspend his ruling while it moves to file an appeal (see IRS to Appeal Ruling Barring Licensing of Tax Preparers and Tax Preparers Contest IRS Legal Maneuver).
The three independent tax preparers who won the ruling filed a response this week in federal court to the IRS’s attempt to impose its licensing scheme on tax preparers. The agency asked the court to lift an injunction entered against it on January 18 after it lost in federal court, claiming that it would suffer a variety of harms if the court did not suspend its ruling. The Institute for Justice, a libertarian law firm in Arlington, Va., which represented the three preparers, filed a legal brief on Tuesday responding to the IRS’s claims of “irreparable harm,” contending that the agency had exaggerated its claim of financial harm by 2,000 percent as well as inflated other figures.
“The IRS has repeatedly and grossly misrepresented how the court’s ruling in this case will affect this tax season, tax payers and the IRS itself,” said Dan Alban, lead attorney on the case at the Institute for Justice, in a statement. “The sky is not falling. The judge’s timely ruling preserved the historical status quo that tax preparers have never been licensed by the federal government. The IRS wildly inflates its numbers and now it knows what it feels like to be on the wrong side of an audit.”
In its request for the injunction to be lifted, the IRS argued that turning off some of its computers would cause “irreparable harm,” and so would transferring 167 employees to a different department, even though the IRS also acknowledged it was badly understaffed.
In its legal brief and a supporting declaration from IRS Return Preparer Office director Carol Campbell, the IRS grouped together the Registered Tax Return Preparer regulations that were struck down on January 18 with other regulations relating to a tax preparer identification number, or PTIN, that were not affected by the lawsuit, the Institute noted.
The agency claimed the court’s ruling would cost it $4 million per month in lost revenue, when 95 percent of those funds would come from the unaffected PTIN regulations, and only $192,697 in revenue would be lost due to the RTRP regulations being struck down, a 2,000 percent exaggeration, according to the Institute.
“But even taken at face value, the IRS’s arguments are truly appalling,” said Alban. “The IRS told the court that their licensing scheme is a cash cow, and the agency must be permitted to continue milking hapless tax preparers, despite a federal court declaring their scheme unlawful.”
The IRS also failed to inform the court that, 15 days before the court’s ruling, the IRS announced it would delay enforcement of a key component of the licensing scheme by one year, the Institute noted, referring to the IRS's requirement that registered tax return preparers complete 15 hours of continuing education in 2012. Thus, the IRS’s argument that the ruling would harm the agency was completely undercut by its own actions, the Institute argued. In addition, after the ruling the IRS announced that it would stop enforcing its PTIN regulations, even though they were never challenged by the lawsuit or affected by the court ruling, the Institute noted. The IRS then complained to the court that without the PTIN regulations in place, the agency would be harmed, attempting to link the lawsuit and court ruling to the IRS’s unrelated actions.
28 Comments
DDTS -- The IRS requires e-filing only if you "file" > 10 tax returns, but it's own definition of "filing" is MAILING them to the IRS. I prepare about 75 federal tax returns, but since my clients mail them after they sign them, and therefore I do not "file" them, I do not e-file tax returns. I have confirmed my interpretation of IRS' regulations with the IRS.
Posted by: DLZALLESTAXES | February 13, 2013 10:48 AM
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In addition to collecting 39 MILLION from us to get on board with these PTIN numbers. The IRS also released our names, addresses, telephone numbers to all kinds of companies that said they were education companies or said they were setting up PTIN directories and sending us emails with 'information' they said they obtained from the IRS. forcing a lot of us to scramble to get PO boxes and other phone systems and things in place to handle the deluge of callers and SPAMMERS for the past 10 months. Is the IRS going to reimburse us for paying 65.00 two years in a row 39 M X 2 IS 78 million they collected. JUST 3 YEARS AGO THERE WAS 'NO CHARGE' TO GET A PTIN number. SOON THE STATES MAY START CHARGING US TO HAVE A NUMBER ON THEIR ELECTRONIC FILING SYSTEMS.
ARE WE STILL BOUND TO ONLY FILLING 11 PAPER RETURNS AND THE REST MUST BE FILED ELECTRONICALLY
SOMEONE FROM THE IRS NEEDS TO CLARIFY THESE ITEMS
Posted by: DDTS | February 6, 2013 1:20 AM
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I am awaiting my refund, with penalties and interest. Thanks again Mr. Alban, at least some few citizens have not been zombied into extinction.
Posted by: BRES | February 4, 2013 5:02 PM
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Tax service in its own right, they do their work conscientiously. Clarity in their actions is the dialog of trust between the service and its customers, the taxpayers. New rules should not undermine customer confidence in the work of the tax. They caused the fire on themselves. Today their actions are credible. Education and competence Revenue Service to explain to Taxpayer are not doubt.
Posted by: nadezdamindyuk | February 4, 2013 3:40 AM
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This is yet one of the most saddest and pathetic court cases to go down in history. The IRS is obviously experiencing "Judgement Day"!. Enforcing this RTRP without "Just Cause" which violates a tax preparers civil rights should be enough evidence proving the IRS need to surrender they commited a felony, therefore, the IRS should be subjected to paying fines which include penalties and interest for decieving all professinoal in the tax industry, however, I still respect the purpose the IRS symbolizes, yet, the IRS took it upon itself to regulate policies and procdures at the expense of hard working Americans who work for lving preparing taxes. This incdent with IRS is a perfect example of why each of us as individuals needs to keep our "EYES OPEN" and pay attention just like those 3 individuals who had the guts to take the IRS to court and won overwhelmingly. Now the IRS is behind on what it is supposed to be doing for taxpayers to get thier returns filed in a timely manner, however, the IRS appears to have given its best shot implementing the RTRP that, unfortunatley, many tax professionas have frowned upon. The IRS will do whatever they feel is necessary to enforce the law and tax preparers need to be doing what is expected of them by the taxpeyers, however, this is lesson fall all to learn, and there is plenty of toom for improvement, therefore, both the IRS and Tax Professionals from all walks of life need to discover ways to work together as as a team instead the IRS instilling fear into those tax professionals who desire to pursue a career in the tax industry
Posted by: johnnydoe | February 3, 2013 3:38 AM
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Federal law superceds state law, in the country. Or, Ca. is anyone aware of that?
Posted by: plarker | February 2, 2013 9:32 PM
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Education is always good. Along with continued education. Tax laws and publications and tax rates change every time you turn around. Any of the people that use Tax Software to prepare their clients return are suppose to end up with the same results providing the same information is entered into the Tax Program in the correct forms. I do not know but I would bet that out of all the tax returns prepared today are being prepared with a tax program and in order for that program to be used it has to be tested and past by the IRS before it is excepted. Some where in the articles it states that the public prepares 40% of their own taxes with Tax Software produced by the different companies offering Tax Software. And it would seem if they could knock out some of the Tax Preparers it leaves more customers for the Big Tax Companies to sell their product to more clients that use to go to the tax preparer because they were reasonably priced. Every year the Tax Season comes up you have the Large Tax Companies that make Tax Software for the General Public advertising they can have their Taxes filed for Free. It is hard to beat that price and when they advertise for Free they also sell their Products to the Public yet the Public is able to file their own Tax Return using the Big Box Companies Software without any knowledge on how to prepare their Taxes other than from following the instructions in the Program. Yet it is these same Big Box Companies that are doing the Big Push for the New Regulations that were struck down? Unfortunately if this is Job Creation it only made 167 new jobs at the IRS and who knows how many additional jobs it made for the Tax Software Companies and Educational Companies to do the Testing for the Continued Education. Yet for years now I just wonder how many Returns are actually not prepared with Big Box Tax Software? Hopefully everything will be worked out. Having to pay a registration fee every year for your PTIN that one has been using for several years now every year seems like it has been created only to take in more money and also for the continued education department. When in reality the bulk of all tax programs have self checking built into the programs to make sure their is not an error in the preparation of the Tax Return. It will be interesting to see what becomes of the ruling. The public is authorized to prepare their own returns with the Big Box Companies that the current Tax Preparers are no doubt using the very similar products that come up with the same results. If the public is allowed to prepare their own returns using the the same software that the Paid Preparers are using and do not have to pass testing. It seems like the new laws were created to bring in additional income to the Taxing and Eductional Industry.
Posted by: Jim J | February 1, 2013 6:41 PM
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I have been doing taxes since 1999 and get my CE's every year to continue to do returns. First, I thing that if you have been doing returns for 5/10 years you should be grandfathered in. Second, I hope that this whole program is thrown out the back door. Just because you are a CPA,or a EA doesn't mean you can't make mistakes. Their are a lot of them that are not up to speed also, or do lot of favors for their clients to avoid paying just do tax as well. This competency test is not a cure all by any stretch.
Posted by: taxman1951 | February 1, 2013 6:22 PM
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AGREED jbetatum! Well said. This whole thing was just a ploy to get money AND a WITCH HUNT after qualified preparers. I've seen PLENTY of returns prepared incorrectly by the 'exempt' individuals and companies. And in your reference to IRS employees, a study/test was done not too long ago, and 67% of them answered somewhat simple questions INCORRECTLY. WHY DON'T THEY have to do this? There's that old saying: "Call the IRS, ask a question, get an answer, then call back 5 minutes later and get a different answer." And they're testing US???
All this would have done is create 'black market' preparers. Big government needs to stay out and give the TAXPAYER the benefit of choosing who prepares their returns (credentialed or not). Scammers will continue, the only preparers who were hurt by this ridiculous ploy are the HONEST ones to begin with. Believe me, those who lobbied for their 'exempt' status, were already poised to raise their fees as soon as this took effect and wiped out much of their competition. I say hooray for those 3 preparers taking this to court for all of us!
Posted by: joyful1 | February 1, 2013 12:59 PM
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Let's don't forget how much the IRS hauled in by selling the PTIN list to companies hawking continuing ed classes and software and every other marketable thing they can that relates to taxes and accounting. I've been inundated with junk emails since the PTIN regs came in. Bottom line with all these requirements, they will only keep the honest preparers honest. For those folks who are dishonestly preparing returns, scamming clients, or scamming the feds, they'll will figure out a way to keep doing so. It doesn't matter what letters you have or don't have after your name. I jumped through the IRS hoops, received the "registration" because I would lose most of my business if I couldn't file tax returns. Will it make any difference in the work I do? No. I try to be as diligent as possible with all the work I do. I don't need the IRS to tell me to do as good a job as I can or else. Frankly, I think they need to require a little more professional credentials with the folks that actually draw a paycheck from the IRS! My guess is most of them couldn't pass that preparer return! BTW-the only reason I knew about the lawsuit is because I read it in "Accounting Today". Google tax return preparer lawsuit and Huffington Post was the first major news outlet in the results at #8. Also, those three preparers had every right to take the IRS to court just like we had the right to stick our heads in the sand and just comply.
Posted by: jbetatum | February 1, 2013 12:40 PM
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Reply to phdesmond: I agree with you, use your designation, you earned it! I was scheduled this week to take the exam (I had to postpone about 2 months ago due to health issues, and this was the soonest I could get back scheduled). Of course, now I'm out not only the fee to take the exam, but also the fee to reschedule. I am a California Registered Tax Preparer. In California and Oregon (the only 2 states in the country), we are required to take an exam to become registered (which I passed at 98%) and do continuing education yearly as well (for BOTH Federal AND State tax law). I believe for the states that already require this (California has required this for decades), we who are already 'registered' should have also been 'exempt' from additional burden, both financially and timewise. I'm wondering why all states do not require this. Seems California and Oregon are (or were at this point) subjected to 'double duty' and that really isn't fair.
Posted by: joyful1 | February 1, 2013 12:39 PM
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i now have letterhead that identifies me as a registered tax return preparer. i will sign every return with RTRP after my name. i earned it, and it is already impressing my clients. my diploma will hang on the wall of my home office. no one can take it away from me, and no one has even suggested that the IRS or congress or anyone can take it away from me. except for some contributors to this discussion, who feel it may cause confusion. pshaw, i say.
RTRP and proud. like 55,000 others, latest count i saw.
Posted by: phdesmond | February 1, 2013 12:11 PM
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To make things fair and square, why not require every tax preparer to become an EA. If you are not an EA, don't prepare tax. EA is an IRS sponsored program, so just stick with that. This confusion all started when IRS wanted to make more money by having all tax preparers registered and also getting to pass the joking little exam they came up with. They will get more money by making sure only fully qualified tax preparers prepare tax.
Posted by: taxxie | February 1, 2013 11:26 AM
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Another vote for SNAFU. At this point, either you have complied with requirements that were in effect prior to the court order or you haven't. The time,money,sweat,tears, blah, blah, is only interesting. Nothing is fair, nothing is free. Deal with it. Since we live in such a litigious society let's give the legal profession a chance to double dip on this one. How about a class action suit with RTRPs as plantiffs against the three who started this nonsense? I met the requirements and plan to pursue an EA. Until I receive written notification from the IRS that my RTRP registration is revoked, I will continue to represent myself as such. The tax season will be over before the smoke clears on this one. As for Congressional involvement, they should work on a budget first.
Posted by: kctax | February 1, 2013 11:14 AM
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Wait, based on this article the IRS receives over $45,000,000 per year just from issuing PTINs? ($4,000,00/month x 95%). First the IRS forced us to disclose our Social Security numbers to the public (the same number that every government agency tells us to safeguard and not disclose), then establishes a PTIN to correct this abuse, and now makes us pay $45,000,000 per year for a solution to an IRS-created problem?
Posted by: dague | February 1, 2013 11:09 AM
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I wonder why the Congressman wrote to the IRS about updating their website. Why didn't he take the attitude of protecting his constituents but promoting a bill to give the IRS the authority to regulate tax preparers and stop all the silly law suits. Let's get back to the basics of preparing our clients tax returns because we have the knowledge and training to do it right.
I signed up for the PTIN when the IRS first offered it, so that I wouldn't have to put my social security number on every return I prepared. Anyone remember that? Now it costs $63.50. So what? I prepared over 700 returns each season. The cost is about $.09 a return.
If a preparer thinks that an annual investment of $63.50 and 15 hours of continuing education is too much effort, then please get out of the business.
Clients pay to have their returns prepared because they are smart enough to know that they don't know how to do it.
Preparers should be smart enough to know that education allows us to prepare the returns accurately.
As far as not being informed about the courts case, I received e-mails from NATP because I'm a member, from the IRS because I signed up with them and from Accounting Today because I'm registered with them. The case was also discussed in one of the tax seminars that I attended. There is no excuse for whining about not being informed.
Posted by: mapp540 | February 1, 2013 10:55 AM
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i agree with SNAFU -- i learned some useful stuff by studying for the test. i am a better tax return preparer for having done so.
Posted by: phdesmond | February 1, 2013 10:42 AM
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To janejohn
I think my knowledge and efforts are worth much much more than 50c...When you take a test, even if you feel you don't need to take it, you always learn something new...maybe not career changing.... but new and when you learn something new you are always better for it. Did you really not learn anything? Why is everybody so set at minimalizing the efforts of those who take the rules seriously, if the entity that sets the rules is misguided by the power it thinks it have? No, the IRS did not give out Licenses and I don't know of anyone who actually thinks they did, but if a person wants to be recognized for their efforts, than he or she should be able to do so without been put down with condescendence.
Posted by: SNAFU | February 1, 2013 10:36 AM
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The big mistake the IRS did was not grandfathering in existing tax preparers. I took and passed the RTRP exam on the first try. I was looking a a financial issue if I did not. Why should an existing business tat has been in business a while forced to be shut down.It was un American Many people would have financially hurt except the large firms. The other error was that attorney's got a free pass weather they prepared taxes or not. If the IRS would tweak the system and allow for grandfathering would go along way to solving the problem. Then let new comers take the test. The grandfathered preparers could not call themselves RTRP unless they passed the test, but could continue their practices. All PTIN holders should be required to do the 15 hours of continuing education. Luckenbach & Associates
Posted by: lewisl3 | February 1, 2013 10:28 AM
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In one of these comments I see the phrase "RTRP license." In fact, the RTRP registration does not bestow a "license" on paid preparers. It does not even bestow any "certification" on paid preparers. The RTRP requirements only mean that preparers are registered with IRS, period. Circular 230 is quite clear that paid preparers are not allowed to use the RTRP designation to imply IRS approval or recommendation or certification, and it's certainly not a license. I have passed the RTRP test myself and paid the PTIN fee, and my sense is that that and 50 cents buys me a cup of coffee (the current price is more likely $5, especially if it's Starbucks).
Posted by: janejohn | February 1, 2013 10:17 AM
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In response to Nickie. Why should, those of us who did everything we were required to do, just forget we did it, forget the hours and the money it took to do it, and not tell our clients or others that we fulfilled all the IRS requirement even if now we find out the IRS had not authority in requiring what they did? Why should the preparers who diligently do everything they were asked to do, not have the right to tell any one about their accomplishment! Are you saying we should just put the IRS Certificate in the trash as if it never happened? I have been preparing taxes for more than 30 years, and, in reality, 99 % of my clients do not even know that I had to do all that I did. Did I want to do it? Of course not! Passing the test was not one of my concerns, but the time and the money that it took to get there, yes, that was my concern and I don't think I should act like it never happened! You may not agree with me, but if you think about it, you will see that I am right.
Posted by: SNAFU | February 1, 2013 10:16 AM
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This licensing scheme, which, incidentally, I have fully complied with, not wanting to endanger my 600 client practice, is just one of many efforts by the IRS to enlarge their power and empire. They have taken over the administration of 5 other government agencies since Obama's first inauguration, they are in the process of becoming the administrator of Obamacare, and they have made tax preparers a de facto arm of the IRS by requiring us to collect documentation on taxpayers' returns and make them available to IRS inspectors. All of this is way more alarming than just having to be licensed. It does point up the need to rein in this juggernaut, however.
Posted by: mrdocuman | February 1, 2013 10:15 AM
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Also, I have seen some tax preparers with their signs advertising their RTRP license. The IRS need to inform the registered RTRPs to remove their signs because that will also be confusing upon clients.
Posted by: NICKIE | February 1, 2013 9:56 AM
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Most prepares are not aware of the ruling because the News has been 'deafening' silent about the issue. When the news does not please the administration, the Media just ignores it! Hasn't anyone figured this out yet? I have spoken to IRS auditors who had no knowledge of the ruling! It is the Media's and the IRS responsibility to make sure the tax preparers are informed on rulings that affects their work and their life. If the Court would have ruled that all tax preparers who did not take the test would be arrested and sent to jail, or would be charged a huge fine... more contribiution to the "cash cow.."the IRS and the Media would have been more than happy to inform everyone. They would have been all over it even before Accounting Today would have had a chance to e-mail does of us who get their e-mail. I have renewed my PTIN, I have taken the Test and passed it, I have taken the 15 hours CE, and received the IRS certificate. When put all together, the cost of the PTIN, the cost of the materials for the exam preparation, the cost of the course itself and the cost of the test. And yes, I had to pay and additional $35.00 because I had to reschedule the test do to a health problem! It was not cheap! Since we cannot rely on the Media to let us know what is going on, than, yes, it is the IRS duty to inform the tax preparers. For the past year an on half we received hundreds of e-mails form the IRS and their entire course preparing affiliates, pressuring us about the exam, the course preparations, the PTIN renewal and the CE hours. Why not send us ONE e-mail alerting us of the Court ruling?
Posted by: SNAFU | February 1, 2013 9:54 AM
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Authority? the IRS doesn't need no stinking authority. Really folks, for the few (in comparison to the total number of preparers out there) cases of improper conduct that the IRS has prosecuted, they have spent a lot of money. (by the way not their money but that forced from the preparers via PTIN registration fees). If there is a need for regulation and registration, it might be that the first place to start is with the IRS, every year more IRS employees (per capita) fail to file or file more fraudulent returns than any other segment of the US population. In addition, abuses by auditors and collection agents abound. Do preparers who diligently try to serve the best interests of their clients need to be told and forced to comply with regulations that do little to improve efficiency, or service to the client need to be regulated and put under the microscope, or wouldn't the money be better spent overseeing the IRS.
Posted by: SullivanAcctg | February 1, 2013 9:29 AM
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I had to inform many of my taxpreparer friends. They had no idea. There were no notices sent out by IRS or the Courts and I never heard it mentioned on the news. The only reason I know is because of Accounting Today's timely information coming to me in email.
Posted by: sylviacroft | February 1, 2013 9:05 AM
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Doesn't Congressman Boustany learn anything? The IRS or Treasury never respond to his inquiries, like they ignored him on the IRS Bulletin 2012-20 that he was protesting about the new regulations being put on banks to report Non resident interst in the first feeble step towards a domestic FATCA, or DATCA.
They issued it anyway...
From your own story: Congress Probes IRS FATCA Interest Regulations: Accounting Today http://bit.ly/13J05Kd
Posted by: Just Me | February 1, 2013 7:53 AM
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How can anyone who prepares taxes as a profession, not be aware of the courts ruling?
Posted by: Ed Walton | January 31, 2013 9:06 PM
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