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Accountants To See IRS In Court Over Tax Preparer Program

by Mike Godfrey, Tax-News.com, Washington

21 July 2014


The American Institute of Certified Public Accountants (AICPA) has filed a federal lawsuit calling for the voluntary tax return preparer regulatory program planned by the United States Internal Revenue Service (IRS) to be declared unlawful.

AICPA President and CEO Barry Melancon stated that "the AICPA has been a steadfast supporter of the IRS's overall goals of enhancing compliance by tax return preparers and elevating ethical conduct. However, the IRS's new rule regulating tax return preparers is an unlawful exercise of government power."

In the wake of losing a lawsuit in a ruling declaring an earlier attempt to regulate tax preparers as an overreach of power, the IRS recently announced it is to issue guidance on an Annual Filing Season Program (AFSP) for the 2015 filing season; a voluntary initiative offering certification to unenrolled preparers who complete educational requirements.

Under the new AFSP, those paid tax return preparers who complete a required amount of continuing education, including a course in basic tax filing issues and updates, ethics and other federal tax law courses, will receive a record of completion from the IRS, and will be included in a database on the IRS website that will be available by January 2015 "to help taxpayers determine return preparer qualifications."

The IRS database will also contain information about practitioners who already have recognized credentials and higher levels of qualification and practice rights. These include attorneys, CPAs, enrolled agents, enrolled retirement plan agents (ERPA) and enrolled actuaries, who are registered with the IRS.

Currently, anyone who prepares all, or substantially all, of any federal tax return or refund claim for compensation is required to obtain a preparer tax identification number (PTIN). The pending guidance will explain that tax return preparers with a valid PTIN who do not obtain a record of completion as part of the Annual Filing Season Program, or are not an attorney, CPA, enrolled agent, ERPA or enrolled actuary, may still prepare tax returns, but will not be included in the public directory.

The AICPA believes that, while purporting to implement a "voluntary" program, the AFSP is "mandatory in effect," is a mere "end-run" around the previous federal court ruling, and no statute authorizes the proposed program. "The IRS," Melancon added, "simply does not have the authority to proceed with the new rule. … Worse yet, the new rule will do nothing to address the problem of unethical or fraudulent tax return preparers – which should be a top priority."

In particular, the AICPA has noted that, while the the proposed program is being held out as voluntary, "in reality tax return preparers would face an overwhelming, compelled incentive to participate in the IRS's credentialing program, meaning that the proposed program will be de facto mandatory. In the wake of [the previous court ruling], that is impermissible."

Melancon concluded that the IRS "should withdraw the new rule, consult with stakeholders, and use the tools and data already at its disposal to monitor unethical tax return preparers. At a minimum, the IRS must conduct a legitimate notice-and-comment rulemaking before proceeding."

In reply, the IRS is reported to have confirmed that it is certain it has the authority to implement a voluntary continuing education program for tax return preparers, that the AFSP does not conflict with any administrative or legal requirements, and also that the new program does not violate the previous federal court's decision.

TAGS: individuals | court | compliance | tax | tax compliance | law | Internal Revenue Service (IRS) | tax authority | education | professionals | United States | regulation | individual income tax

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