AICPA sues IRS to stop return preparer program

[Yardley CPA]

http://www.journalofaccountancy.com/News/201410547.htm

 

 

AICPA sues IRS to stop return preparer program

 

By Alistair M. Nevius, J.D.

July 15, 2014

 

 

The AICPA filed suit in the U.S. District Court for the District of Columbia on Tuesday, asking the court to halt the IRS’s recently introduced Annual Filing Season Program. The AICPA’s three-count complaint asks the court to declare the rule implementing the program unlawful and stop its operation.

 

The Annual Filing Season Program, introduced June 30 in Rev. Proc. 2014-42, allows unenrolled tax return preparers and others to receive an annual Record of Completion from the IRS if they complete continuing education courses from IRS-approved providers. Participants must have a valid preparer tax identification number (PTIN) and agree to abide by the rules in subpart B and Section 10.51 of Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10). Program participants will be listed in an IRS directory of federal tax return preparers.

 

The AICPA’s complaint is brought under the Administrative Procedure Act (APA), 5 U.S.C. §§551–706, and it alleges that the IRS violated the APA’s notice and comment requirements when it implemented the rule through a revenue procedure. The APA requires federal government agencies to provide for notice and comment, except when issuing “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” (5 U.S.C. §553(b ). The complaint states that the revenue procedure implementing the program fits under none of these exceptions.

 

The AICPA also alleges that the rule is “an illegitimate exercise of government power” because it violates the APA and is “an impermissible end run” around the decision in Loving, 742 F.3d 1013 (D.C. Cir. 2014), aff’g 917 F. Supp. 2d 67 (D.D.C. 2013), which held that the IRS does not have statutory authority to regulate tax return preparers. The complaint notes that the rule implements a program that is nearly identical to the mandatory return preparer registration program that was invalidated in Loving.

The complaint also notes that the IRS cites no statutory authority that allows it to implement the new rule, and, under 5 U.S.C. §706(2)©, without statutory authority, the program is invalid.

 

The AICPA argues in its complaint that while the program is purportedly voluntary, it will actually be “de facto mandatory because it creates a strong competitive incentive for unenrolled tax return preparers to comply.” In promoting the program, IRS Commissioner John Koskinen has noted that participating in the program will allow return preparers to “stand out from the competition (Ohlemacher, “IRS Announces Voluntary Program to Certify Tax Preparers Who Complete Course, Pass Test,” Associated Press (June 26, 2014)). The AICPA argues that the IRS is thus aware that the program creates a situation in which unenrolled tax return preparers must participate in order not to lose business to those who do.

 

Finally, the complaint states that the rule is “arbitrary and capricious,” that by creating new categories of tax return preparer it will confuse consumers, and that it does nothing to address the issues of unethical or fraudulent tax return preparers who understate income or file invalid refund claims for their clients.

 

The complaint asks the court to declare the rule unlawful, vacate and set aside the revenue procedure, declare null and void any action taken by the IRS pursuant to the rule, enjoin the IRS from implementing the rule, and postpone the effective date of the rule pending the conclusion of the case.

[Jack from Ohio]

YEE HAW!! Another lawsuit about a nonsensical program from the IRS.

[JohnH]

I think AICPA has correctly identified the problem. The next-to-the-last paragraph holds the key - this designation will effectively create an "EA-Lite". I'm not suggesting that preparers who go through the AFSP are in any way as qualified as EA's, but the average taxpayer simply won't be able to tell the difference. The program dilutes to some degree the qualifications of CPA's and especially EA's, without accomplishing anything significant.

[Jack from Ohio]

I think AICPA has correctly identified the problem. The next-to-the-last paragraph holds the key - this designation will effectively create an "EA-Lite". I'm not suggesting that preparers who go through the AFSP are in any way as qualified as EA's, but the average taxpayer simply won't be able to tell the difference. The program dilutes to some degree the qualifications of CPA's and especially EA's, without accomplishing anything significant.

RTRP was exactly the same thing.

FYI - If you acquired the RTRP, you do not have to pass the test. Just sign up and continue CPE credits.

[JohnH]

True to some extent, but RTRP has enough teeth to have some effect in unscrupulous preparers. This program has none.

[Jack from Ohio]

True to some extent, but RTRP has enough teeth to have some effect in unscrupulous preparers. This program has none.

RTRP was as toothless as Clarence the cross-eyed lion. No enforcement was ever available. Only benefit was to be able to put the letters after your name, and the IRS was advertising it to the public.

[JohnH]

I thought RTRP made everyone subject to Circular 230 and thus their PTIN could be revoked if IRS got after them.  If I understand this program correctly, Circular 230 is now voluntary, and disconnected from the PTIN. 

[Jack from Ohio]

Changes to Circular 230 made all paid preparers subject to its regs. RTRP was the vehicle to show that you were competent. There were no teeth in the regs for RTRP. The IRS was going to implement further regulations to prevent preparers that had not tested to show competency from preparing certain returns. The Supreme Court stopped all that.

The IRS position is the same except they cannot require testing to be allowed to prepare returns.

[JohnH]

... and unenrolled preparers are not subject to Circular 230, unless they voluntarily agree to be via the new program. IRS cannot arbitrarily make that call.  That's part of the Supreme Court decision, I believe.  Correct me if I'm wrong. 

[ILLMAS]

It's only been two weeks since the IRS Nationwide Forum in Chicago, unfortunately I don't remember all the details, but from what I remember, if an unenrolled preparer files a Form 2848 or other forms governed by Circular 230, then that preparer is subject to Circular 230.

 

Jack, maybe you might remember some of the examples.

 

MAS

[Jack from Ohio]

... and unenrolled preparers are not subject to Circular 230, unless they voluntarily agree to be via the new program. IRS cannot arbitrarily make that call.  That's part of the Supreme Court decision, I believe.  Correct me if I'm wrong.

It was the United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT that made the ruling. It upheld the United States District Court for the District of Columbia ruling against the IRS. The IRS chose NOT to send it to the Supreme Court.

Here is reality. What the courts have ruled and what the IRS, essentially Karen Hawkins, believe are two entirely different things. I heard her speak about the new "voluntary" Annual Filing Season Program at the IRS Nationwide Forum in Chicago. She thinks she is above the law and the courts. She is pressing forward with no regard to the court rulings.

Stand by for more "shots" at the un-enrolled preparers from her office....

If she/they could just implement a plan to actually stop the fraud and incompetence, I would be all for it. All that has been done is just political FLUFF.