Tax Litigation Law Office of Scott Kauffman
(949) 474-1820

Hackney Literary Award
Mighty River Short Story Contest Winner

Professional standards for tax return preparers

The IRS is tightening its regulation of tax return preparers. The new requirements are being phased in, but will start with registration.

The requirements will vary according to which category of tax professional a preparer falls into. For enrolled agents and registered tax return preparers, they will include competency testing and continuing education (CE). There are also proposals pending to require background checks for all types of tax professionals.

The overall goal of these requirements is to encourage professional conduct by tax preparers. The absence of such conduct was at issue in a recent ruling by the U.S. Court of Appeals for the Ninth Circuit.

The case concerned a tax return preparer who engaged in disreputable behavior in advising his clients that they did not have to pay taxes. The preparer used two wrongful arguments that authorities have universally rejected as frivolous.

The first is that the Sixteenth Amendment to the U.S. Constitution, allowing for a federal income tax, was not properly ratified. The other is that Internal Revenue Code section 861 exempts various forms of income from taxation. These are tax protester arguments that have been repeatedly repudiated by the courts.

The Ninth Circuit held that the tax return preparer who gave this advice was properly barred from practicing before the IRS. The court said it was not possible for the preparer to believe in good faith that his positions were allowed under the law.

In short, the court distinguished clearly between good faith differences about how to interpret the law and frivolous positions that simply cannot be made in good faith.

Source: "Overview of Tax Return Preparer Requirements," IRS

Additional source: CCH, Federal Tax Day, 11-28-12

Our firm handles a full range of tax law issues. To learn more about our practice, please visit our tax preparer penalties page.

No Comments

Leave a comment
Comment Information