The Internal Revenue Service has filed notices with a federal district court and appeals court of its intention to appeal a judge’s ruling that struck down the mandatory testing and continuing education requirements of its Registered Tax Return Preparer regime and asked the court to suspend the January ruling that invalidated the RTRP regime.
Judge James Boasberg
Last month, U.S. District Judge James E. Boasberg of the District of Columbia ruled against the IRS on behalf of three independent tax preparers— Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wis.— who had filed suit against the IRS’s tax preparer regulatory scheme (see Court Rules IRS Doesn’t Have the Authority to Regulate Tax Preparers). The suit, known as Loving v. IRS, was brought by the Institute for Justice, a libertarian law firm in Arlington, Va. It argued that the IRS lacked the statutory authority to impose the requirements for all tax preparers to pass a competency exam and take continuing education courses, and the judge agreed.
The IRS then announced its intention to appeal the ruling and asked Judge Boasberg to suspend his original ruling, arguing that it would disrupt tax season (see IRS to Appeal Ruling Barring Licensing of Tax Preparers). Boasberg denied the IRS’s request, but clarified the ruling on February 1, enabling the IRS to re-open its Preparer Tax Identification Number, or PTIN, online registration system for tax preparers. The judge also clarified that tax preparers could take competency tests and continuing education courses on a voluntary basis, but they would not be required to do so while his injunction remained in place (see Court Modifies Ruling Invalidating Tax Preparer Regulations).
Last week, the IRS filed notices of appeal in both the district court and the D.C. Circuit Court of Appeals announcing its intention to appeal the earlier rulings, and on Monday it filed a Motion for Stay Pending Appeal in the D.C. Circuit Court, similar to the motion for a stay that it filed in the district court that Judge Boasberg had denied on February 1.
Dan Alban, the lead attorney on the case with the Institute for Justice, noted that the IRS has not filed its appeals brief yet, and probably will not for some time, as it needs to wait for the district court to transmit the case record to the court of appeal, and for the court of appeal to set a briefing schedule. Another hurdle for the IRS is that it has not yet obtained the approval of the Solicitor General for the appeal, which is required before it can proceed with the appeal. The IRS indicated in one of the briefs that it intends to file an opening brief in March and move for expedited oral argument. The IRS did not respond to a request for comment.
“Footnote 2 of their motion this week notes that they still don’t have authorization from the Solicitor General to proceed with the appeal so they actually refer to those notices as a ‘protective notice of appeal,’ meaning they’re protecting their ability to appeal if the Solicitor General gives them authorization,” Alban said in an interview Tuesday. “But, as of when they filed the brief yesterday around 3:00 or 3:30 pm, they didn’t have authorization from the Solicitor General, which they need in order to proceed with the appeal.”
The motion filed by the IRS for a stay pending appeal in the D.C. Circuit Court of Appeals is similar to the motion in the U.S. District Court that the IRS filed with Judge Boasberg. “They’re asking the Circuit Court to suspend the injunction while the case is on appeal,” Alban explained. “They’re asking for the same relief they were asking the district judge for. This will probably be heard by a panel of three judges, but it can in some cases be heard by just one judge. It’s not an emergency motion, so it probably would be heard by a panel, but that’s up to the court to make that determination.”
Alban is uncertain of when the IRS will file the actual appeal in the case. “They have filed their notice of appeal, so they’re on record as having signaled an intent to appeal in both the district court and the actual court of appeal itself,” he said. “In footnote 2 of their motion that they filed on Monday, they say they intend to file their brief in March and to request an expedited oral argument. Now that assumes that they get the approval of the Solicitor General to proceed with the appeal, and it also assumes that in order for the briefing schedule to be set, the case record needs to be transmitted from the district court to the court of appeals, and in addition the court of appeals needs to set up a briefing schedule. Those things will have to happen first. Then once they have set a briefing schedule, they would give the IRS about 40 days from when the record was transmitted or when they set the briefing schedule to file their opening brief.”
Since March is only a few days away, the court may not act that soon, but Alban conceded it was possible. “At the same time this motion for the stay pending appeal will be ongoing,” he added. “Our brief is due in a couple of weeks. They would get a reply brief, I believe, a week after that, and then the court could rule at that point.”
He estimates the briefing probably wouldn’t be completed until around March 18. The court wouldn’t be able to rule on the IRS’s motion for a stay until the briefing is completed, but the court could set a briefing schedule for the main appeal itself, Alban acknowledged.
“The motion for a stay is sort of a side issue,” he explained. “It’s not the main merits of the appeal. It’s just whether the injunction is temporarily suspended while the case is on appeal.”
Optimistic Prospects
Alban noted that the IRS is asking the D.C. Circuit for the same relief that it asked Judge Boasberg to grant in late January and that he had denied on February 1. He is optimistic about the chances of prevailing against the IRS on both the appeal and the motion for a stay.
“We think Judge Boasberg issued two very sound opinions that were well considered, authoritative and definitive on the subjects he was ruling on,” said Alban. “I’ve had a chance to review their motion for a stay, and it raises many of the same arguments they raised before Judge Boasberg, and that he rightly found to lack merit.”
In Boasberg’s second ruling, Alban noted that the judge was merely clarifying that his original order did not affect the PTIN regulations, and the IRS was not enjoined from enforcing the requirement for tax preparers to register for a PTIN. Alban doesn’t have any objection to the PTIN, nor to the judge’s clarification that tax preparers can still take competency tests and continuing education on a voluntary basis.
“I think that’s fine,” he said. “That allows people to choose whether it’s something they value. If tax preparers think that their customers would value that certification, then they can voluntarily choose to obtain it. On the other hand, if they have longtime customers who aren’t shopping around, and they’re not looking to expand their customer base and are happy with how many people they have currently, then the certification might not be worth it for them, so this gives them the freedom to choose. It also gives consumers the freedom to choose whether they want someone who has this RTRP certification or whether they want someone who has a different certification or whether they want perhaps a preparer who has prepared their taxes for 10 or 20 years, or someone who they have heard good things about through references or good word of mouth.”
18 Comments
I beg to differ with governor. Not against being tested (had date set when it was canceled), nor finger printed (have been for e-filing; and, many times in my government career before tax career); not against 15 hours of classes a year (most years I take 40-50); do not mind the cost, I just resent the inference that all of us who do not happen to have a designation associated with taxes are either incompetent or dishonest, therefore, we must be tested and that will make us competent and honest. IRS could spend some of the money they get from PTIN renewals to pull returns by PTIN; and, do spot checks to see what type of errors are being made; and, concentrate on the few instead of thousands. I cannot say often enough that regardless of whether you are now carrying a designation after your name or not; or in the future, it is not going to stop those who are greedy and dishonest. I joined NATP over 25 years ago when I retired from my government career and have continued active relationship with what I believe is one of the best organizations for getting the best tax education year after year. I use the research department, not always because I do not know the answer; but, because of time and the need to have another set of eyes on a problem that may only pop up once in four or five years. As a one person office with seasonal help for administrative chores, I have handled as many as 300 clients (now down to 140) and am getting out because I want to do more with my life now than make people happy to get a refund or not owe much this year!! My clients are daily telling me how much they will miss me and am I going to get a person like me to take over. They know I am not a CPA or an EA; but, they do know what my background was in my first career and they know I am honest and will not push the envelope when I prepare their returns. What more can I say! Guess I sound defensive; and, I guess I am as those answering us on this site cannot see that we believe this was the wrong action for the problem and seem to believe being tested after 25 to 30 years will solve it. And, I know you will not change your mind - and neither will we. May God Bless us all in our ventures be they taxes or otherwise.
Posted by: Snowshoe | March 7, 2013 6:08 PM
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Preparing taxes and representing Taxpayers is not a right. It is a privilege you earn, for someone to have the confidence in you to prepare their taxes correctly - and for them to pay you to do it.
Why is completing 15 hours a year of CLE and taking a minimum level of competency test such a big deal? Especially when there are a TON of fly-by-night tax scam operations in existence. The only people who complain about having to prove a bare minimum level of tax knowledge and proficiency is CLEARLY someone you should steer clear of. Either they do not think proving competency is important (which is one red-flag) or they do not think they can pass the exam (which is another red-flag)
Its 15 hours - over a 365 days year....get real.
This lawsuit is a WASTE of everyone's time.
Posted by: admin@GoldingTaxSolutions.com | March 4, 2013 7:09 PM
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I still do not know what the problem with testing and getting numbers etc is. Oregon has had a licensing law with 2 levels of testing for over 40 years and it tends to get rid of the really bad preparers cause we look out for ourselves and our clients. If there are many complaints, look for them to come from the ones who cannot do the job, or don't want someone looking over their shoulders. We also have yearly education and licensing requirements and we are not among the biggest complainers. Most of us are wondering what all the fuss is aabout. Getting PTINs and testing are all in a years work for us and, like it or not, we do what we have to do to keep going. I do not know what further fees will be added to what is already being done, but they are about the same as what we already pay. IRS thought our program was good and did a lot of investigating before they implemented their plan. Oregon preparers and Consultants did wonder why we were not grandfathered in as we have already met the standards of the IRS and then some. If you think their testing is hrd, take the oregon tests, then complain. they are not easy, nor should they be, this is an important job we have undertaken and anyone should be proud that they meet some hard standards. We all fix other preparers returns, but let's do it with good education behind us, not just to make someone else look bad, but, if they are truly BAD, turn 'em in and keep on going. Our job is to prepare the correct return for our clients and keep them honest with the IRS!!!!!!!!!!!!! the program should be self-sustaining, not profit making. oregon's pretty much is, when they have to raise the costs, we pay, but we darn well better not be paying toooooo much, or it will go to the general fund, and that is not fair or pretty......
Posted by: annebaughman | March 1, 2013 12:09 PM
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Go Dan... Beat these guys back again!! What is needed is Tax simplification, not more regulation because we make our system so complex.
Ultimately, if Congress thinks it is a good idea because they just can't help themselves by continually handing out campaign contribution favors via the Tax code, they should just legislate it. The IRS has taken onto itself way too much unilateral regulatory authority, and needs to be reigned in.
Posted by: Just Me | March 1, 2013 12:05 PM
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Snafu (interesting choice of name based on your discourse), there are oversight bodies in place that regularly deal with complaints regarding CPAs and EAs. There is no mechanism in place to deal with non-credentialed preparers sans the BBB, IRS whistleblower program, or a criminal/civil filing. Nothing stops someone with little or no demonstrated competence from putting out a shingle and saying they are a professional tax preparer.
There will be preparer regulation, and hopefully it will be legislated so independent bodies can oversee the regulation. No baloney!
Posted by: governor | March 1, 2013 10:27 AM
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To governor, topbeancounter what a bunch of baloney. I have been preparing taxes for over 30 years. I have amended quite a few tax returns done be EA's CPA's and especially by H&R Block. I don't lump all of you in the world of incompetency and you should not lump me in the pot with incompetant TP. I think its just plain greed on the part of the IRS & the rest of you, plus schools that offer CPE classes. Lets weed out the TP's and there is more tax clients for us. Taking the test - though I hate taking tests is inconvenient. I don't drive - There are only 3 centers in my state that offer the test. Based on the IRS calculations of 350,000 TP - that's 7 thousand per state.
I have made and corrected mistakes. I've worked on my own, a CPA (4 years),the IRS and H&R Block. I have my paid my dues with the IRS, did the finger printing, up to date on my classes and then some, have 2 tax attorney's in the family that I go to if I'm really stuck. I have had only 3 clients audited and the IRS had no problems with my calculations. How well have you done? Like Snafu & Seagull & snowshoe said you can't regulate honesty.
Posted by: katzzmeow | February 28, 2013 9:02 PM
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I agree with governor 100%.
Posted by: OC | February 28, 2013 12:53 PM
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Snafu, don't get the governor analogy unless you infer that I am a cheater, which is impossible since I am not a tax preparer or accountant. I've been involved in the accounting and tax preparation industry for 28 years as an association executive. I've seen countless cases of incompetence that were never dealt with as well as been forced to represent blatant incompetence when said individual was a member.
I advocate preparer regulation because it sets a program in place that affords some chance that a practitioner will remain current on tax law and preparation issues. I support it because it does require demonstration of competence via testing even though the current testing regimen is so elementary it doesn't accomplish the goal. I also agree the IRS sold the program down the road when it allowed the "supervised preparer" designation which reopens the door to the very abuses they sought to curb. I support public awareness campaigns to educate taxpayers on how to insure a prepare is, in fact, qualified to provide preparation services.
Legislating the process will allow us the chance to correct mistakes made with administrative implementation and exclusive control. For example, we can establish a public board and committees to oversee the IRS and the program (checks and balances) so they don't have exclusive control. We can re-visit many of the issues raised above to insure competence is properly tested and CPE is better targeted to achieve ongoing competence.
We will always deal with incompetence whether there is regulation or not, but with proper regulation there would be a means to minimizing public harm. Currently, there is none.
Posted by: governor | February 28, 2013 8:25 AM
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"governor" says that the 3 plaintiffs are "pester children for why regulation is needed" but no one has any information regarding their professionalism or competence to make any judgment about their abilities or quality of work. We do however know that the IRS program was initiated without legislative authority. And that is what is at issue in this case. As a side not I when the IRS first announced this "new" program of preparer "regulation" they had a webinar. I attended that webinar and was VERY impressed by the back of organization, professionalism and competence of the individual who was in charge of the new (at that time) program. I asked about the legislative authority far the program and never gat an answer (despite the indication of the webinar leaders that ALL questions would be responded to by e-mail after the webinar). The IRS hers known far a very long time that this program was walking on eggshells due to lack of authority for it since they initiated it. And a second note, if (and that is a pretty big if) preparers need to regulated,the IRS is the last agency that should have that authority! They have a severe conflict in regulating (controlling) the way preparers represent their clients and interact with them.
Posted by: SullivanAcctg | February 28, 2013 7:22 AM
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There have been Governors who were sent to Jail for Fraud, Abuse of Power, Bribery, Evasion of Income Taxes and much more. Some of them are still serving. They were our legislators. They made the law we have to abide by. Did it keep them from being dishonest? Of course not! Our past Treasury Secretary was caught cheating on his Income Taxes when he was appointed. Doesn't anyone remember that? His excuse was, "Turbo Tax told me I could take those deductions"...Really? The Treasury Secretary of the United States relies on Turbo Tax for Income tax laws?? Again, really? My point is that, either you are an honest person or you are not. Legislations, regulation, mandatory exams (I have taken mine) will not have anything to do with your honesty. The IRS found a good cash cow and started milking for more than they should have. They should have been happy with the money they were making for "renewing" our PTINs! As usually, they got greedy and greed will get you, no matter who you are, any time. Yes, we have a fraud problem, but getting on the back of the prepares will not solve it because, like everyone else has stated, the dishonest Tax Preparer or the dishonest Tax Payer know how to get around the law better than any of us like to think.
Posted by: SNAFU | February 27, 2013 2:00 PM
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I completely support the Insitute of Justice statements. First of all: errors can be made by CPAs, EAs as well. And I saw those quite a few times. Secondly, it should not be the government's primary role to regulate every business in the country. Ok, some say that there are errors, so let's regulate. Let's look at this this way - the errors (or even fraud) can be made in every profession, does this mean that everything and everyone must be regulated? In a competitive market, not honest and trusted business will go bankrupt automaticarry by the market forces. I have a masters degree in accounting. Should we say, that prople with just highschool diploma can't be allowed to be a tax prep practitioner? Would this sound right? I see what the regulation brings using the example of mortgage industry regulation - nothing good to the consumer and to the business itself sadly. To make sure that somewaht complicated returns prepared correctly, I am a member of NATP and have an access to research service. Do you think it would be right to mandate every tax practitioner to call NATP or any other organization or just simply do the reasearch to clarify the tax questions? I don't think so. It should be a personal choice of applying ethics to profession. Third, all these tests, CPEs, etc, don't eliminate fraud anyway. We as tax preparers already had to go thru the background checks and fingerprinting way back. Fourth, this licensing scheam only benefits licensing centers and government itself via added jobs, collected fees, additional sourse of revenue to CPE companies. Let's IRS conduct more free webinars as they occationally do, so the tax practitioners have the access to training.
Posted by: seagull | February 27, 2013 12:20 PM
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I have said from the beginning of this ordeal - you cannot regulate honesty. And, face facts, that is what this is about with a toss in about competency. Crooks will always find a way to get around obstacles. I have been preparing tax returns (all types in the beginning) for over 25 years following 32 years with US government as a civilian (not IRS). My clients range from children of clients to high level military and business clients. Many came to me from large tax firms because they did not get personal attention and often had to return for "redos" as the work was done by clerks and signed off at the "owner" level without close attention. I also had clients from an attorney and his tax person (allegedly a CPA - will not state beyond what was on return) and after taking over their work, the attorney and the CPA both served prison time for fraud. It is the individual, not the designation, that will determine if you are getting an honest qualified person. You need to seek them out through referrals. I have never advertised. I was prepared to take the test (had my date) when it was stopped. Was disappointed as I had decided since my experience was not equal to a designation, that is meaningless, I was prepared to bite the bullet and take the test. This is my last year in the business (full time) but not because of this - because I have now had two careers and need to enjoy what is left of my life. Am a military widow and have a wonderful great grandson to enjoy and leave this tax world behind. Of course, since I have another business that I manage, I will still be doing my own return and probably my sons and grandsons. Good luck to all the honest preparers, regardless of your designations, because if this does not plug the tax gap, they will think of something else.
Posted by: Snowshoe | February 27, 2013 10:23 AM
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I completely agree with the governor also. As an Enrolled Agent, I had to go through three very in depth tests, back ground check, finger printing and 30 hours a year in CE to be able to prove I am a tax professional after being in the tax field for over 26 years. I constantly get returns that were prepared the previous year by preparers that did not know what they were doing, or software that made errors. I also think that every one that works at the mega tax preparation franchises should have to go through the same testing, education and certification as the rest of us. Why do they get a pass?
Posted by: taxpro1 | February 27, 2013 10:07 AM
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I agree congress should do this. The industry needs to get the non professionals out of the business because they are giving all of us a bad name. There are to many so called tax preparers out there that don't have a clue on how to prepare a correct tax return. Keeping up with the latest changes are a must. Every year there are changes and new forms. This year has several new forms and if you are not up to date you will not know what to do. All of my Tax Pros are constantly in training all year. Taxes are very complex and there is no one who knows it all, that is impossible but you need to know how to research to be a good tax preparer.
John L Jones Franchise H&R Block
Posted by: worldofjones | February 27, 2013 9:48 AM
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This is the wrong battle to be waging. CPA's and attorneys have waged a constant war against other tax preparers, based on their contention that if an individual was not either a CPA or an attorney, they were not competent enough to prepare tax returns even though many of these other professionals are better equipped to prepare tax returns and offer our services to clients at reduced rates. This regime is a perfect opportunity to demonstrate our competence and hold ourselves out to the public as knowledgeable tax preparers.
The real battle should be over fingerprinting for E filers. The IRS makes demands that tax returns be e filed and then demands that those idividuals be finger printed. Ridiculous invasion of privacy for a task that benefits the IRS not anyone else.
Posted by: dariusward@earthlink.net | February 27, 2013 9:46 AM
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right on governor. I thought it was just me; then I look over another new client that came to us because of the "apparent" errors from the prior return preparer. (I'm being very kind.) The crap that passes for acceptable when it comes to tax preparation needs to be addressed and in my world, it's still way too easy.
Just added yesterday another (now former) TurboTax prepared tax return who is facing a medium four digit balance due from 2010, courtesy of the IRS. When I inquired what the problem might be, I was met with "I just followed the written word". This poor fellow has a phd, but unfortunately it's not in the area of taxation, but chemistry.
Posted by: topbeancounter | February 27, 2013 9:39 AM
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I am a registered RTRP and do not have any issues in taking CPE courses to learn more and keep abreast of new laws, changes, etc...
Please note that as an RTRP, the very long application specifically stated what type of returns I will be preparing.I have only done so to be compliant in preparing and filing "payroll tax" returns only.
I do have an issue with the compentency test as it needs to be revised to 2 seperate tests to match the application submitted in gaining the PTIN & RTRP status. One for those that just do payroll tax returns, and the other for those that prepare income tax returns. To have questions in this test to include income tax returns for only payroll tax return preparers will result in many of us failing the test as I do not and will never be doing income tax returns.
If I do decide to start completing income tax returns, I would be required to complete a new application for my PTIN. So why make only payroll tax preparers take a test for things they do not so, are not approved by the IRS to do is beyond me.
I still feel the CPE's are a valuable tool and will continue to take classes. But I strongly urge someone to step up and make the tests comply with the applications submitted to the IRS.
Posted by: DKW | February 27, 2013 8:54 AM
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Why waste time on appeals? LEGISLATE THE PROGRAM INTO EXISTENCE! These three plaintiffs are poster children for why regulation is needed!
Posted by: governor | February 27, 2013 8:51 AM
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