IRS Commissioner Sees Further Appeals on Tax Preparer Lawsuit as Unlikely

Internal Revenue Service commissioner John Koskinen said the IRS is still looking at various options after losing an appeal on its authority to regulate tax preparers, but now sees a further appeal as unlikely.

In an interview with Accounting Today on Wednesday, Koskinen acknowledged that the IRS is still looking at options such as further appeals, pursuing legislative remedy in Congress, and offering voluntary credential for tax preparers. “We're obviously looking at all three of those,” he said.

“We're disappointed with the decision, although the decision is fairly final in the sense that the only appeal would be to apply for a writ of certiorari to the Supreme Court. And getting a writ granted by the Supreme Court is unlikely in most cases, and probably unlikely in this one as well.”

Earlier this month, the D.C. Circuit Court of Appeals agreed with rulings last year by U.S. District Court judge James Boasberg that the IRS  lacked the statutory authority to require testing and continuing education of tax preparers (see Tax Preparers Defeat IRS in Appeals Court Ruling on Licensing Scheme).

Koskinen pointed out that there wasn't any disagreement between different circuit courts on which to base the appeal. “We don't have controversy between different circuits, so I'm not sure,” he said Wednesday. “We just had a meeting yesterday talking about it. So we're reviewing it, but it would be a long shot as we go.”

He also admitted that going to Congress to give it the statutory authority to impose tax preparer regulation was also a long shot. “A legislative fix, obviously, would help, so we're also taking a look at trying to figure out how to get that pulled together,” said Koskinen. “We've had some indications of support in the Congress, although I recognize that in today's political climate, getting legislation to give the IRS authority to do anything is probably a bit of a stretch.”

Koskinen sees voluntary certification as the most likely route, as he indicated during a recent press conference (see IRS's New Commissioner Favors Voluntary Tax Preparer Certification). “So it may well be that our best approach, and we are looking at that as well, is whether, as I've said in the past, some sort of voluntary program would be productive,” he said in the interview. “It would be a way of offering educational support for preparers. The people who are going to be cutting corners are probably not appropriate and are unlikely to accept a volunteer offer. But my sense is we would get a reasonable percentage of people who would be delighted to take the course or courses over time, get a certification from the IRS that they're not an Enrolled Agent, but on the other hand a certification that they've met sort of minimum standards that they might be able to market, or that people might be more comfortable going to them for.”

Koskinen disputed comments he has seen from preparers that the Registered Tax Return Preparer regulation program was aimed at favoring large tax prep chains.

“There have been some people saying, 'Well, the whole thing was an attempt to drive small preparers out of business so everybody would go to large preparers.' That is clearly not the intention,” he told Accounting Today. “We are just concerned that we have a responsibility to make sure that those holding themselves out to be preparers have some minimum experience and qualifications for taxpayers. As somebody noted in one of the responses, hairdressers are regulated in all 50 states, and yet if you're getting your tax return prepared you can go to almost anybody operating out of the back room or his car. And in most states you can do that. It just seems to us that we ought to do something.”

However, Koskinen does foresee some issues with offering a voluntary certification program. “When it was going to be a mandatory program with our contractor, we could predict pretty well what the volume was going to be and organize it appropriately, including structuring the fees,” he said. “If it's a voluntary one, it gets a little more difficult to project, but I do think that we ought to at least take a hard look at that.”

We will be posting more comments from the interview, including responses from Commissioner Koskinen to questions from readers of Accounting Today and Tax Pro Today.