Two Democrats on the Senate Finance Committee have introduced legislation to regulate paid tax preparers in response to the federal court decision that found the Internal Revenue Service had exceeded its statutory authority in regulating preparers.
Senate Finance Committee ranking member Ron Wyden, D-Ore., and Senator Ben Cardin, D-Md., unveiled legislation Thursday that provides the Treasury Department and the IRS explicit authority to regulate paid tax return preparers. Wyden chaired the committee until control of the Senate changed after last November’s elections.
With nearly half of all Americans turning to others to prepare their tax filings each year, the bill would require preparers to demonstrate competency in preparing tax returns, claims for refunds and related documents.
“It’s bad enough that taxpayers have to navigate their way through an overly complex tax code, but worse that many also unknowingly rely on fraudulent or incompetent tax preparers to help with their returns,” Wyden said in a statement. “This bill helps protect hard working taxpayers by ensuring that tax preparers are held to clear and enforceable standards.”
The legislation was introduced in response to the decision in the case of Loving v. IRS. Judge James E. Boasberg of the U.S. District Court for the District of Columbia ruled in 2013 that the IRS had exceeded its statutory authority in imposing mandatory testing and continuing education of independent tax preparers as part of its Registered Tax Return Preparer Preparer regime. A federal appeals court upheld the decision last year. In response, the IRS has introduced a voluntary program for continuing education and testing of preparers known as the Annual Filing Season program.
The legislation introduced by Wyden and Cardin aims to give the IRS the statutory authority that the courts said it lacked. The IRS had argued that it had the authority under an 1884 law that was originally intended to apply to federal regulation of compensation claims for dead horses killed during the Civil War, but the judges disagreed. The court decision invalidated the IRS’s RTRP program, which aimed to regulate unenrolled preparers who are not already regulated under the Treasury’s Circular 230 rules. Those rules still apply to tax practitioners such as CPAs, Enrolled Agents and attorneys who are authorized to represent clients before the IRS.
“Our tax code is complicated,” said Cardin. “To protect taxpayers from incompetent or unscrupulous preparers, the IRS needs adequate tools to ensure that preparers are qualified and held accountable. I’m pleased to join in support of this legislation, which restores meaningful and much-needed standards and oversight in the paid preparer industry.”
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