Liberty and justice for all United States persons abroad

The Isaac Brock Society

IRS should NOT be able to license tax preparers

Posted on by Posted in Issues regarding US persons abroad 36 Comments

As you know the IRS wants to require a license, issued by the IRS, in order to charge money to prepare tax returns. For the moment this requirement has been struck down by the courts.

https://twitter.com/FATCA_Fallout/status/292905409373683712

 

I believe that the discussion on this is missing the most important point which is captured in this exchange:

 

 

 

The problem is that that if it is the IRS that is issuing the license, then tax preparers will think that they must please the IRS instead of being fair to the client. It is like the problem of the lawyer who wants to put everybody into OVDP and the lawyer who considers a number of compliance options.

This case is likely to go to the Supreme Court. I suspect that the decision that the IRS can’t regulate will stand.

 

 

36 thoughts on “IRS should NOT be able to license tax preparers”

  1. One of the great things about no longer being a US citizen is that I no longer have to suffer this kind of abuse from the United States federal government.  I prepared my last two return with the help of TaxAct.  Afterwards, a prominent former litigator for the IRS told me I was nuts and that I should go ahead and pay someone to figure it out correctly.  Yet I begrudge the postage stamp for send a return to the IRS.

    Now I just have to pay to get my Canadian taxes done.  That’s enough evil for one year and as much stress as I can handle.

    My advice:  Relinquish US citizenship before they make it harder.

  3. You know, this is a BIG issue for Tax preparation community in America and really stirs passions amongst the compliance Complex that we should pay attention to.

    Only two comments here says to me that many here do not understand the significance of this ruling, any more than we complain that Homelanders do not understand FATCA  🙂

    On Accounting Today, I have NEVER EVER seen as many comments as this one story has created.  Have a read.

    Interesting one to watch. 

    Remember, it is the complexity of the Tax system, and the incompetence of the preparation community in its ability to deal with it, combined with the BIG Four Accounting Firms, the FATCA Compliance Complex that have an vested interest in the regulations that IRS created that have been struck down.

    In a small way, we should be celebrating this victory for the small guy against the IRS Compliance Complex that creates the complexity for you and I.

  5. I agree with some of the comments that say that it’s up to the tax payer to choose a licenced preparer if they need to. And certification justifies higher fees for some.

    But if tax preparers would have done their jobs correctly, many immigrants would not have found themselves in non-compliance because they would have been asked about their foreign bank accounts and advised to file FBAR.

    And could this decision backfire in court against taxpayers, making them even more willful blind in case of mistakes for not have chosen a certified tax preparer?

  6. Here’s a thought … throw out the 72,000 page, 4 million word US tax code. Rewrite it in plain language with a limit of say 500 pages (I’m thinking for individuals not corporations here) and then it would be possible for almost everyone to do their taxes without a tax preparer. I made a comment on another thread regarding this ruling. I mentioned how mom & pop tax prep ops provided a much needed service right now to people who cannot do their own taxes (complexity, language barrier, location, no computer access, etc.) and cannot afford to pay tip-top totally certified tax preparers. These small operations probably use computer tax programs and do not make much profit from their clients. It is the IRS employees who are paid to answer questions who need to bring their tax knowledge up to the highest level with extensive, repeated testing. The IRS wrote it, broke it and it’s up to the IRS to provide accurate answers until they fix it.

    http://news.yahoo.com/us-tax-code-longer-bible-without-good-news-191208508–finance.html

  7. @Tim

    Just shows what a small guy with a determined attorney and effort can do.  And, of course, the Compliance Complex is disappointed and was in favor of the regulation. Their vested interest is in competition eliminating regulation.  For this moment they have been beaten back.  Yes, I am glad someone else sees this as the BIG deal I do. 

    Wished there was some way or someone to take on the IRS regulations in a law suit against DATCA lite, Bulletin 2012-20   It is certainly in dispute that they have this regulatory power to do this, so where are the friggin’ banks that oppose it or even the Congressman?  What a feeble lot they are!   Ideally, it should be some of the smaller ones to take it on, as the BIG guys probably see it as another way to cement their TBTF franchise further when compliance costs force out the smaller to midsize competition.

    Maybe we should be contacting this attorney

  8. IRS to Appeal Ruling Barring Licensing of Tax Preparers
    But of course.  Need to protect the professional Tax Prep Complex from competition. 

    A number of folks thought that the new scheme stunk. Chief among them was long-time preparer and tax blogger, Bob Flach. Flach, who noted that he had never been flagged for a bad return, isn’t a CPA, an attorney or an EA. He has been incredibly vocal about the new rules, telling me (perhaps one of my favorite quotes from an interview on the blog ever):

    Just because a person has the initials CPA or JD after his (or her) name does not mean he knows his arse from his elbow when it comes to 1040 preparation.

    Also this and this…

    IRS asks judge to let tax preparer regulation proceed

    UPDATE 2-U.S. IRS: Let new tax return preparer rules proceed 

  11. Tax Preparers Contest IRS Legal Maneuver

    A trio of tax preparers who successfully sued the Internal Revenue Service to halt its mandatory testing and continuing education requirements is contesting the IRS’s request for a federal judge to suspend his ruling against the agency while it mounts an appeal.

    We should be paying attention and rooting for these guys..

  13. It brings me pleasure to see Shulman’s initiatives being beaten back again…  So, continuing the saga…IRS Loses Big In Court (Again), Tax Season Chugs Along

    On February 1, 2013, a federal court denied the IRS motion. The Court also went to great lengths to modify the injunction to make it clear that the “requirements are less burdensome than the IRS claims.” In other words, the IRS motion implied that the injunction was more over-reaching than it really was.

    Judge Boasberg found that the harms claimed by IRS “to the extent they exist, are hardly irreparable, and some cannot even be traced to the injunction.” The Judge agreed with the assertion of the Plaintiff that much of the harm claimed by IRS (such as under-utilization of testing centers) would happen even without the injunction because of the IRS’ own actions. Additionally, with respect to the fees collected by IRS, Judge Boasberg questioned – as did many tax preparers – why tax preparers should continue to pay into a system that might be found to be unlawful. If that happened, the Court noted, the IRS would be on the hook for even more money in refunds from tax preparers seeking to recover unnecessary fees.”

    Finally, the Court addressed the issue of harm to the public. In terms of tax dollars, the Court found that continue to waste dollars during the appeal wasn’t sensical. And, the Court noted, “as long as portions of such regulations remain blocked, less money will be needed.” So, the harm on a fiscal level is not immediate.

    In terms of protecting the public from unscrupulous or negligent preparers (which time and again are curiously only linked to those who are not a member of a designated group), the Court again stressed that if regulation of preparers was found to be in the public interest, this matter could be more properly addressed in Congress.

  15. @Mark Twain…

    I agree that the IGA was not spoken to in the Hire Act, and so there ‘may be’ a legal challenge that can be made against their actions, although we know they think that this is just a Competent Authority agreement to implement the intent of Congress. 

    Of course they are proceeding with the Final FATCA Fatwa unabated so they are not shirking from the Legislation as written.  This CA agreement is just held out as a way around some of the country legal barriers with a little reciprocity thrown in to entice. 

    It would be nice if we could get some attorney to really look into whether or not there is legal justification or authority to do this. 

    To a separate issue….

    Then there is H.R. 4078 which was a vote against IRS bulletin 2012-20  

    Again, I wished there was some attorney, ala Dan Alban, or some group, ala Institute for Justice willing to look into whether or not the IRS exceeded its regulatory powers.  They of course claim they have not, and laid out their reasoning in the bulletin…

    Is this really true, as they claim?  I am not the attorney, so don’t know.  

    It has been determined that these regulations are not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations.

  16.  Beating the H&R Tax Blockers. And the Horse the IRS Rode In On:

    Big government and big business are often blood brothers, colluding to squeeze out the little guy. So here’s a shout out to a group of small-business tax preparers who have struck a blow for competition and the rule of law.

    Judge Boasberg on Friday denied the IRS’s request for a stay of the injunction. Rather than continuing to fight in court, the agency would do better to cashier the rules on legal and economic grounds. They are a classic example of big business harnessing government power to aid the powerful at the expense of small-business competitors. Meantime, won’t someone in Congress tell the IRS to stop exceeding its legal authority?

  17. @Just Me  :  Even Eisenhower warned of the military-industrial-complex that was developping during his presidency.  What about the IRS-compliance-industry complex.  Great, create more jobs for greedy experts without creating real sustainable wealth for society.

  18. The difference between wishing and doing is either writing or calling Institute of Justice. Same as Saturday night—-the worst that can happen is that they say no

  23. Just continuing to follow this story…

    This in Accounting Today..

    Senators Lay out Tax Reform Options and Consider Re-imposing Tax Preparer Regulation

    “As we’ve said all along, Congress never gave the IRS the authority to license tax return preparers, and the IRS can’t give itself that power,” Alban wrote in an email to Accounting Today. “The IRS has tried to pull a fast one, claiming that it has authority to license tax return preparers under an 1884 statute that predates both the modern income tax and the modern incarnation of the IRS. But a federal judge rejected this IRS power grab and ruled that the agency isn’t allowed to reinterpret statutes however it wants. Instead, as Judge Boasberg noted, under our system of law, ‘statutory text is king.’ In other words, Congress—not the IRS—gets to make the law.

    “This proposal indicates that the Senate Finance Committee also recognizes that the IRS does not have clear statutory authority to license tax return preparers,” Alban pointed out. “This is just the latest indication that Congress itself doesn’t believe it has given the IRS the authority to license tax preparers. Previously, Congress has considered eight bills in the past eight years that would have amended the 1884 statute the IRS is relying on (31 U.S.C. Section 330) to allow the IRS to license tax return preparers. But none of those bills has ever passed. And if Congress really thought it had already given the IRS the authority to license tax preparers, it would make no sense for Congress to repeatedly consider bills that would give the IRS this new power.”

  25. This warms my heart to see the IRS beat. If Congress wants to pass legislation to regulate tax prepares, then let them pass them. The IRS has again over stepped its bounds and Dan Alban has made the case and the Court Agrees. End of argument!

    If you don’t reign them in with legal action, they take power onto themselves, as we have seen with their IRS Bulletin 2012-20 http://1.usa.gov/11sGZsl and the FATCA IGA regime of dubious legal pedigree. http://bit.ly/WZKphF They will assert anything so as not to be constrained by the will of Congress.

    You can argue endless whether or not regulation of tax prepares is good or bad. WHAT is BAD is that our tax complexity of Congressional making is so outrageous that makes “bean counters” think their profession should be regulated because the tax payer is too ignorant to choose a professional who understands it.

    In America we seem to believe that the consumer is incapable of basic “buyer beware” behavior anymore, and so our business needs regulation. Or is it really that we want a closed club to protect us against competition? Endless arguments here, so won’t belabor it.

    Bottom line, Dan and the Loving lawsuit is correct, and the IRS is WRONG, no matter the merits of regulation. The court has agreed, they do NOT have the power to unilateral do what they want, and for that we should all cheer!

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