Saturday, January 19, 2013


You could have knocked me over with a feather!

The first thing I did when I returned home on Friday night from a lunch with former co-workers from my days at the Art Center in Summit NJ (we have remained friends for decades – and get together for each of our birthdays) was check my email.  There was a message that a fellow “twit” (and fellow tax pro and tax blogger) had mentioned me in a “tweet” with a link to a news item. 

Here is where the link took me – “IRS Loses Lawsuit in Fight Against Tax Preparers”.  And here is what I learned -

A federal judge on Friday barred the IRS from imposing a series of new regulations, including a competency exam, on hundreds of thousands of tax preparers.

U.S. District Judge James Boasberg in Washington ruled against the IRS in favor of three tax preparers who filed suit last year with the help of a libertarian legal group, the Arlington, Va.-based Institute for Justice.

The Institute for Justice argued that the IRS lacked the statutory authority to impose the regulations and said they would put tens of thousands of mom-and-pop tax preparers out of business, because the regulations were onerous and create a competitive disadvantage to the attorneys and CPAs who were exempt.

The judge's order includes an injunction that bars implementation of the regulations, which have been put in place on a piecemeal basis.

An IRS spokesman declined comment Friday on the judge's ruling.

The government can seek to appeal.”

Elsewhere on the web I found this quote from the Court decision –

With an invalid regulatory scheme on the IRS's side of the scale and a threat to Plaintiffs' livelihood on the other, the balance of hardships tips strongly in favor of Plaintiffs. Finally, the public interest would be served by a permanent injunction because the IRS's new Rule is ultra vires [beyond its power].”

Here is what I “blogged” about the Institute for Justice’s initial complaint back in October of 2010 –

InInstitute for Justice Speaks Out On IRS Power Grabat THE ROTH AND COMPANY TAX UPDATE BLOG he refers to statements by Dan Alban, a staff attorney at the Institute for Justice in Arlington, Virginia who has filed comments with the IRS on behalf of the Institute opposing the proposed licensing requirements.

The IRS and the Latest Licensing Outrageat DAILY CALLER Alban says-

This scheme will disproportionately hurt small tax-return preparation businesses and independent preparers, many of whom may be forced out of business.”

Why do those opposed to tax pro registration continue to say the costs of the new regime will be prohibitive and hurt small tax return preparation businesses and independent preparers, forcing many out of business? And that the regime will increase the cost of tax return preparation services? I wish they would explain.

You don’t get any smaller or more independent than me and my practice. As I have said over and over again the costs are minimal – and hardly worth passing along to clients. $64.25 per year ain’t going to break me – nor will a nominal one-time $100-$200 for the test.
{As an aside, the only thing that would possibly force me out of business is being required to submit all my returns electronically using the current system of expensive and flawed tax preparation software.}

Speaking from my specific individual situation – I would, to be honest, not be upset if there were no regulation of tax preparers. I have been operating profitably and happily for 39 years without regulation, and would just assume continue that way for my last 11 years. If regulation had not been proposed by the IRS I certainly would not be campaigning for its institution. But if it is to become a fact of business life I can see how it does have merit and provide benefits to preparers, taxpayers, and the IRS.

Now that it is in place, my only real complaints are about having to take a test after 39 years of practice without incident to show that I know what I am doing, and having to sit through 2 hours of “ethics” each year. Having to take the initial competency test is a PITA, and 2 hours of redundant ethics “education” annually is a waste of time – but it is nothing I cannot handle. Many CPE offerings had been including 2 hours of ethics for a few years now – so I have already been wasting my money.

Truth be told, regulation does not affect my practice one way or another – other than as a minor inconvenience. I am not looking to increase or expand my 1040 preparation business – on the contrary I am looking to “thin the herd”. And if I did need more clients I could easily get them by telling my existing ones I was accepting new work. I already attend more than 15 hours per year in CPE classes in federal taxation. And I am honest and ethical.

Since writing the above post I have become more “militant” in my opposition to the initial competency test.  It really does not prove anything – and, as I have said before, by the time one takes the test based on prior year tax law the idiots in Congress can change everything and the exam will have demonstrated that the taker is competent in obsolete tax law.  I support doing away with the test altogether, or, at the very least, providing a “grandfathering” exemption for long-time experienced tax pros like me.  I know, as everyone keeps telling me, that the test would not be a challenge for me, but I just don’t want to waste the time and money on it after over 40 years in the business.

I wholeheartedly support the annual CPE requirement (except for the annual ethics preaching), and feel it should be expanded to include CPA, attorney, and “supervised employee” PTIN-holders.  To repeat (for about the 20th+ time) – if a serious tax preparer is not already taking at least 15 hours of CPE in federal taxation each year he/she certainly should be.  Much more than the competency test, CPE indicates that a tax preparer is knowledgeable and remains current.

As I have said a number of times in the course of the debate on tax return preparer regulation, I would much rather have the IRS institute and oversee the regulation than have it legislated by the idiots in Congress.  As I have also said many times before – the idiots in Congress can fuck up a High Mass!  My preference is, however, having the regulation regime administered by an independent industry-based non-profit organization, similar to the AICPA and the ABA.  An American Institute of Registered Tax Return Preparers if you will.

I doubt that this is the end of the story.  I do expect that the IRS will probably appeal.  Hey, maybe the appeals will take 8 years and I can retire after 50 tax seasons without having to waste time and money on a useless test!


1 comment:

  1. Dear Sir:

    Seems to me that you perhaps missed the point of the suit. It was the idea that the IRS did not have the authority to mandate the various requirements imposed by the IRS concerning the PTIN numbers and the tests.