Reactions among tax preparers to Friday’s court decision striking down the legality of the IRS RTRP mandate ranged from relief to recognition that the tax prep industry needs standards. But a survey of various tax prep-related groups on LinkedIn shows that the decision mostly raised questions.
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“Is this the end of the RTRP?” one member wondered on the Tax Business Owners of America board. “Does this mean Circular 230 is invalid?” wrote another. “Can I get a refund on my test fee?” wrote a third. “I’m guessing no.”
Some preparers voiced satisfaction that they waited to book their test, which was recently considered a risk since testing centers were expected to experience severe logjams of procrastinating preparers later this year. Preparers who supported the idea of tax prep standards voiced dissatisfaction with the court’s decision (“a disgraceful interpretation,” according to one) but also said that how the IRS has gone about the regulation mandate was “not the best,” focusing what they saw as too much attention and public-awareness work on the RTRP designation initiative and not enough on promoting the EA designation.
Others questioned details of the decision. A preparer on the National Association of Tax Professionals board noted that the argument is over the definition of "practice." The IRS has the authority to regulate "practice before the IRS." The IRS has interpreted return preparation as practice, and the plaintiffs believe it is not part of practice.
Preparers also wondered about the IRS reaction to the unexpected decision, some guessing that if the IRS loses an appeal to the decision, “Everyone [who] doesn’t fall in line with what the IRS wants will be audited right out of business.” Few predicted the regulations would simply disappear.
Charles McCabe, CEO of the Income Tax School and Peoples Income Tax in Glen Allen, Va., predicted that the IRS would appeal “and, if necessary, obtain authority from Congress to continue the preparer regulations.”
“I've read that the IRS may also seek an injunction to continue the regulations during the appeal process. The vast majority of reputable tax professionals support preparer regulation, as do most taxpayer protection advocates. The IRS is also deriving substantial revenue from the regulations and I think the U.S. Treasury will not want to see those funds go away and see the IRS holding the bag for the huge investment it has made in developing the regulations,” McCabe added. Other preparers predicted major lobbying by the national prep chains -- and perhaps CPA organizations as well -- to stall any authorization from Congress. Others ventured that the IRS might continue the RTRP program on a voluntary basis.
“If the requirement is reborn, either through appeal or new legislation, what will be the status of those who have taken and passed the test?” one preparer wondered. “Will they retain their designation or have to start over again? Likewise, what will those who have not taken the test yet have to face? Will it be essentially the same test or will those folks be held to a different, perhaps higher, standard?”
“What it will mean in the long run,” wrote a preparer, “remains to be seen.”