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Paid tax preparers and IRS regulations: appeals court rules

How much authority does the IRS have to regulate professional tax preparers?

The short answer is that the agency does not have as much as authority as it claimed to have when it announced an expanded set of requirements for tax preparers. Those requirements - which included competency testing and continuing education - were put on hold by a court ruling in January 2013.

In this post, we will discuss the appeals court ruling confirming that the IRS engaged in over-reaching in rolling out the new requirements.

The court ruling that stopped the IRS's proposed certification exam and continuing education requirements for tax preparers did not affect regulatory structures for tax preparers at the state level. Not every state has such a structure. But as we noted in our June 14 post last year, California is a state that does.

The national scope of the IRS's proposed new requirements, however, has now been resolved. The U.S. Court of Appeals for the District of Columbia Circuit has held that the IRS lacks the authority to require certification exams and continuing education for professional tax preparers.

The IRS has exerted long-standing authority over other tax professionals, including attorneys and certified public accountants. But when the agency moved a few years ago to impose certain requirements on other paid tax preparers, the result was a legal challenge. In addition to certification exams and 15 hours of continuing education, the IRS also sought to require the payment of an annual fee from professional preparers.

The legal challenge to these requirements has now been resolved. The D.C. Circuit has agreed with the lower court that the IRS exceeded its statutory authority in trying to impose them.

Source: Courthouse News Service, "IRS Lacks Authority to Regulate Tax Preparers," Jack Bouboushan, Feb. 12, 2014

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