Return Preparer Regulation: The D.C. Circuit Reinstates the AICPA’s Challenge to the Voluntary Preparer Program

return preparer regulationWhen most people think about tax return preparers, they think of CPAs. But a large proportion of the individuals who prepare tax returns are not accountants. As many as sixty percent of return preparers are not regulated by anyone. This creates problems for the IRS and also for consumers, who may wind up with an incompetent preparer. The IRS initially sought to regulate all return preparers, but that regulation was struck down. Loving v. IRS, 742 F.3d 1013, 1021-22 (D.C. Cir. 2014).

The IRS then shifted to a voluntary approach which it called the Annual Filing Season Program. See Rev.… Read More

Out With A Fizzle: Accountants’ Challenge to Voluntary Return Preparer Program Is Dismissed.

After the DC Circuit invalidated the effort by the IRS to regulate return preparers in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014), the Treasury Department went back to the drawing board. Two initiatives emerged: first, the Department recommended to Congress that it be granted authority to regulate all return preparers; second, it set up a voluntary program for uncredentialed preparers.

This latter proposal was challenged by the American Institute of Certified Public Accountants, which filed suit in July. On Monday, that case was dismissed. American Institute of Certified Public Accountants v. Internal Revenue Service, Civil Action No. 14-1190, slip op.… Read More

Return Preparer Penalties: Imposition of a Penalty Under I.R.C. § 6701 Requires Clear and Convincing Evidence.

The Internal Revenue Code contains a number of return preparer penalties: return preparers can be penalized for preparing returns on the basis of an unreasonable position, I.R.C. § 6694(a); they can be penalized for preparing returns in a willful or reckless manner, I.R.C. § 6694(b); and they can also be penalized for knowingly preparing a return that understates the taxpayer’s liability, I.R.C. § 6701(a). A recent case from the Eleventh Circuit explores the standard of proof necessary to sustain a return preparer penalty under Section 6701. Carlson v. United States, 2014 U.S. App. LEXIS 11001 (11th Cir. June 13, 2014).
Ms.… Read More

A Reach: The DC Circuit Rules The IRS Cannot Regulate Return Preparers.

As is pretty obvious at this time of year, tax return preparation is a big business. Historically, it has not been regulated. And there are some very bad preparers out there.

In 2011, the IRS adopted regulations that required return preparers to register and to take a qualifying examination. They also imposed continuing education requirements. Today, the DC Circuit issued its decision on the validity of the IRS regulations, which were challenged by a group of preparers. Loving v. Internal Revenue Service, 2014 U.S. App. LEXIS 2512 (DC Cir. Feb. 11, 2014). The IRS lost, as the Court concluded that it lacked Congressional authority to regulate preparers.Read More