IRS’s New Competency Requirements for Registered Tax Return Preparer’s Struck Down by U.S. District Court

By David Marrison, OSU Associate Professor

On Friday, January 18, 2013, the United States District Court for the District of Columbia has enjoined the Internal Revenue Service from enforcing the regulatory requirements for registered tax return preparers. In accordance with this order issued by U.S. District Court Judge James E., tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education.

Three independent tax preparers (Sabina Loving of Chicago, John Gambino of Hoboken, N.J., and Elmer Kilian of Eagle, Wisc) worked in conjunction with the Institute for Justice, in filing this suit against the IRS.

Beginning January 1, 2011, the IRS mandated that all paid preparers must have received a Preparer Tax Identification Number (PTIN). In addition to the PTIN, the IRS had mandated that PTIN holders who were not under a regulatory practice (such as Certified Public Accountants, attorneys, and enrolled agents) to pass the Registered Tax Return Payer’s competency exam by the end of 2013 and to obtain 15 hours of continuing education each year. Registered Tax Return Preparers would have been required to obtain 2 hours of ethics, 3 hours of federal tax law updates, and 10 hours of other federal tax law each year.

The court opinion is available online at http://www.ij.org/images/pdf_folder/economic_liberty/irs_tax_preparers/irs-opinion-1-18-13.pdf. The IRS can appeal the ruling to the U.S. Court of Appeals for the District of Columbia Circuit.

The Internal Revenue Service in a news release on its website indicated it continues to have confidence in the scope of its authority to administer this program and it is considering how best to address the court’s order and will take further action shortly. It was noted that RTRP should continue to monitor the IRS website for additional information as it is released. Information can be obtained at: http://www.irs.gov/uac/IRS-Statement-on-Court-Ruling-Related-to-Return-Preparers

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