The IRS announced on January 22 on its website that tax return preparers covered by the Service’s return preparer initiative are not currently required to register with the IRS, to complete competency testing or secure continuing education. The announcement came four days after the U.S. District Court for the District of Columbia struck down the IRS return preparer oversight initiative in Loving, DC D.C., 2013-1 ustc ¶50,156 (TAXDAY, 2013/01/22, J.1 ). The IRS emphasized that the court’s decision does not affect the regulatory practice requirements for attorneys, certified public accountants (CPAs), enrolled agents (EAs), enrolled retirement plan agents or enrolled actuaries. Additionally, any state-imposed requirements are not affected by the decision.
Return Preparer Initiative
The IRS launched its return preparer oversight initiative in 2011 after a number of public hearings and many meetings with stakeholders. Under the initiative, all paid preparers who prepare Form 1040 series returns must successfully pass the registered tax return preparer (RTRP) competency exam except CPAs, attorneys, EAs and certain supervised preparers. RTRPs were required to obtain 15 hours of continuing education annually from IRS-provided providers. The Service also made preparer tax identification numbers (PTINs) mandatory for paid return preparers.
In October 2012, the IRS reiterated to CCH that unenrolled preparers had to take and successfully pass the RTRP examination before December 31, 2013 (TAXDAY, 2012/10/24, I.2 ). According to the Service, more than 300,000 individuals would be required to take the RTRP examination.
After the IRS launched the return preparer oversight initiative, a public interest group representing three return preparers challenged the program in federal court in the District of Columbia. On January 18, the court granted the preparers’ motion for a permanent injunction.
The district court found that Congress authorized the Treasury Department to regulate the practice of representatives of persons before it. The statute defines “practice of representatives” in a way that does not cover tax return preparers, the court added. Representatives advise and assist persons in presenting their cases. “Filing a tax return would never, in normal usage, be described as “presenting a case,”” the court concluded.
“As of Friday, Jan. 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, tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education,” the Service announced on its website. The IRS added that it “will take further action shortly” but did not elaborate.
“It is possible that the IRS may make the RTRP designation optional,” Cindy Hockenberry, EA, manager, Tax Knowledge Center, National Association of Tax Professionals (NAEA), told CCH. The Latino Tax Professionals Association (LTPA) reported on its website that the IRS will no longer schedule RTRP examinations.
CCH Comment: An IRS spokesperson confirmed for CCH, in a January 22, conference call between certain stakeholders and the Return Preparer Office in Washington, D.C., that the Service has stopped scheduling RTRP exams. Additionally, the online PTIN system appears to be unavailable and the Service has removed any mandatory continuing education requirements for preparers.
State Requirements Unaffected
A spokesperson for the California Council on Tax Education (CTEC) told CCH that the decision does not change the registration requirements under California law. “Continuing education and other requirements are untouched,” the spokesperson told CCH. California registers approximately 42,000 return preparers, more than any other state that requires registration.
The court’s decision spawned a flurry of activity on the IRS Return Preparer Office social media site. Many practitioners are asking what the Service intends to do about the return preparer initiative, the RTRP examination and continuing education. Practitioners have also questioned if they will receive refunds for various fees associated with the RTRP initiative.
By George L. Yaksick, Jr., CCH News Staff
IRS Statement on Court Ruling Related to Return Preparers