IRS wins PTIN case

The Court of Appeals for the District of Columbia Circuit has given the IRS a victory in its quest to charge fees for issuing and renewing Preparer Tax Identification Numbers.

The IRS was authorized by Congress in 1976 to require a tax preparer to list an identifying number on any returns they prepared, and specified that the number would be the preparer’s Social Security number. Although PTINs as a substitute for the preparer’s Social Security number have been around since 1999, they weren’t required to be used until 2010. That’s when the IRS began charging for them. And although the service’s attempt to regulate preparers was nullified by the D.C. Circuit Court in 2014, the court left intact the IRS’s ability to require and charge for PTINs.

A group of tax return preparers filed a class action lawsuit challenging the PTIN fee, Brittany Montrois, Class of More Than 700,000 Similarly Situated Individuals And Businesses, Et. Al., v. U.S. The IRS lost in the district court, which found the agency lacks statutory authority to charge the fee. On appeal, the circuit court reversed in favor of the IRS, concluding that it acted within its authority under the Independent Offices Appropriations Act in charging the fee. It further concluded that the IRS’s decision to charge the fee was not arbitrary and capricious.

However, the circuit court remanded the case to the district court for further proceedings, “including an assessment of whether the amount of the PTIN fee unreasonably exceeds the costs to the IRS to issue and maintain PTINs.”

The decision means that preparers won’t be getting any refunds of the fees they paid for PTINs, as the lower court ordered, since the circuit court vacated that part of the district court’s judgment.