IRS Argued Authority To Regulate Tax-Return Preparers

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On February 11, 2014, the United States Court of Appeals for the District of Columbia Circuit (the “Court of Appeals”), in the case of Loving v. Internal Revenue Service, affirmed an order of the District Court enjoining the Internal Revenue Service (IRS) from enforcing regulations related to paid tax-return preparers. The subject regulations were issued by the IRS in 2011 and purported to require paid tax-return preparers to pass a qualifying exam, pay annual registration fees, and meet certain professional continuing education requirements.

The IRS argued it had authority to regulate tax-return preparers based on 31 U.S.C. § 330, which authorizes the IRS to “regulate the practice of representatives of persons before the Department of Treasury.” The Court of Appeals disagreed, describing the IRS’s interpretation as “expansive, atextual, and ahistorical.” Based on its own textual and historical analysis of the provision, the Court of Appeals found that tax-return preparers are not in the practice of representing taxpayers before the Department of Treasury. For this reason, the Court of Appeals agreed with the District Court that the statute does not authorize the IRS to regulate tax-return preparers. Accordingly, it affirmed the District Court decision.

In accordance with Circular 230 Disclosure

Mr. Lynch is a frequent speaker on tax topics. He has spoken for the following organizations: American Electronics Association, Association of American Publishers, Council On State Taxation, Georgetown State and Local Tax Conference, Institute for Professionals in Taxation, National Institute on State and Local Taxation, New York University, Institute on State and Local Taxation, Tax Executives Institute.

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1 comment on “IRS Argued Authority To Regulate Tax-Return Preparers”

  • Harold

    Congress need to enact legislation giving the IRS authority to “regulate” tax preparers who are not CPAs, attorneys (In tax practice) and enrolled agents. This would assure some minimum competency (even the IRS VITA and AARP volunteer tax return preparers are required to make 80% on a competency exam-only get two attempts-involving tax law and return preparation and ethics. There are too many unqualified people who hang up a shingle as a “tax return preparer” and others who are not honest. Something has to be done. The IRS attempt to do this was a good start. Now, the only solution is for Congress to act ASAP. All you good tax preparers call and write your Congressman to support such legislation.

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