About the Recent Court Ruling Against IRS Oversight of Tax Preparers

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Over the past few years the IRS has taken steps to implement a supervisory process designed to ensure the competence of tax practitioners to ensure greater accuracy in the preparation of individual tax returns. The IRS bases its authority to administer the program on a law enacted in 1884 that allows the agency to regulate “representatives” who “practice” before giving them the legal basis for implementing the program and circumventing the legislative process.

In introducing the new rules for taxpayers, the stated primary objective of the IRS is to improve tax compliance by unqualified taxpayers and unscrupulous practitioners who have been found to have committed a number of offenses ranging from filing fraudulent claims to defrauding their clients.

However, recent court decisions have ruled that while the referred statute gives the IRS the power to regulate attorneys, Registered Agents, CPAs, and other professionals who represent clients in “cases” before the IRS, that power is not broad for tax makers. individual. As a result, the judge ruled that the IRS had no legal basis to impose on taxpayers the requirement to be tested for competence and retain a Tax Identification Number (PTIN) for filing federal tax returns.

The decision affects all three aspects of the IRS’ tax-regulation program, namely the requirements for testing, continuing education and RTRP registration, but does not affect the Taxpayer Identification Number, or PTIN, required for registration. This is because PTIN is regulated in a regulation under the authority of a separate law. However, a court ruling evading the IRS made the issuance of PTIN conditional on obtaining the RTRP credential, first.

The court’s decision has been met with mixed reviews. Some industry proponents believe that the IRS should halt the tax-regulating process until it can legally enforce it. On the other hand, a large number of compilers give weight to supporting competency testing and continuing professional education as important in establishing and/or improving the quality of returns filed by tax preparers to ensure adequate service and possible taxpayer representation.

To some, IRS oversight appears to be a way of instilling professional pride and they feel that the title of Registered Tax Broadcaster will add prestige to the profession as a sign of someone who has met the required qualifications and standards of conduct. They prefer to continue testing even on a voluntary basis.

For others, the professional standards foreseen in the proposed regulations are no big deal and mention the need for oversight and education to stem misrepresentation and outright fraud by unqualified or unscrupulous tax practitioners.

The IRS has responded to the Court’s decision by announcing on January 22 that it is working with the Department of Justice and believes it is within its jurisdiction to administer the program it has established to regulate the work of individual taxpayers. . The IRS stated in the same announcement that it is currently considering how best to address the court order and will take further action soon.

Amid uncertainty about the final outcome of the ongoing litigation, it may not be a bad idea for tax preparers to continue preparing as if they will have to take the test at some point in the near future. If the final court ruling is in favor of the plaintiff in a case against the IRS, studying the material will help tax specialists gain knowledge, thereby making them better able to better serve their clients. If the decision is overturned in favor of the IRS, those continuing with their studies will be prepared to test in the short term and with a good chance of passing the exam and obtaining their RTRP credential.

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