CPAs Sue IRS over PTIN Fees

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A pair of CPAs have filed a class-action complaint against the Internal Revenue Service challenging IRS regulations requiring tax practitioners to annually register and pay a fee to the agency to obtain and maintain a Preparer Tax Identification Number.

The class action involves more than 700,000 individual practitioners who are forced to pay for a PTIN every year. The lawsuit, which was filed Monday, seeks an injunction barring collection of the fee and recovery of the more than $150 million in fees the IRS has collected since 2010. 

The challenged regulations were issued several years ago as part of a broad IRS initiative to radically expand its oversight of attorneys, accountants, and other tax return preparers who prepare tax returns for compensation, the CPAs’ attorneys noted. Last year, a federal court in Washington, D.C., ruled that large portions of the regulations issued by the IRS were invalid because the IRS lacked statutory authority to issue the regulations in the case of Loving v. United States, and that decision was upheld by the D.C. Circuit Court of Appeals earlier this year.

The rulings invalidated the IRS’s program for requiring mandatory testing and continuing education of tax preparers. However, the courts allowed the IRS to continue to require registration of tax preparers through the PTIN, but did not rule on the question of fees. The IRS has announced plans to offer a voluntary testing program instead known as the Annual Filing Season Program, but the American Institute of CPAs has filed suit to stop the program (see AICPA Sues IRS over Voluntary Program for Tax Preparers).

Congress allowed the IRS to require tax practitioners who prepare tax returns for compensation to place a PTIN on the returns to help IRS identify the preparer. The plaintiff CPAs argue that the IRS lacks the statutory authority, however, to charge fees to obtain or renew a PTIN and the IRS cannot use fees it has collected for unrelated activities. The IRS uses only a small portion of the fees collected to pay the vendor who manages the online PTIN registration process and uses the bulk of the fees for other IRS activities. The plaintiffs are seeking restitution of the fees collected by the IRS in the past and injunctive relief barring the IRS from collecting similar fees in the future.

“If an agency can charge U.S. citizens to fulfill a requirement, then an agency can tax,” said plaintiffs’ co-counsel, Allen Buckley of Atlanta. “Unlawfully, the IRS has been taxing Americans.”

The other co-counsel, Stuart Bassin of Washington, D.C., said, “The courts have rejected the IRS’s effort to regulate return preparers and it is time for the IRS to return the PTIN registration fees it has collected to support that effort.”

The docket number of the case is 1:cv-14-1523. A copy of the complaint has been posted online by Kelly Phillips Erb of Forbes.

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Tax practice