IRS Seems Ready to Give Up on Regulating Tax Preparers

The Internal Revenue Service has suffered a series of legal defeats in its efforts to regulate the tax preparation profession, most recently this month when a federal appeals court upheld a district court decision that found the IRS lacks the statutory authority to require testing and continuing education of tax preparers.

In an interview yesterday with Accounting Today, the IRS’s new commissioner, John Koskinen, said the IRS is still looking at its options, but he seemed to accept the likelihood that the IRS is not going to win this particular battle in court (see IRS Commissioner Sees Further Appeals on Tax Preparer Lawsuit as Unlikely and Answers from the New IRS Commissioner).

“We're disappointed with the decision, although the decision is fairly final in the sense that the only appeal would be to apply for a writ of certiorari to the Supreme Court,” he said in a phone interview. “And getting a writ granted by the Supreme Court is unlikely in most cases, and probably unlikely in this one as well.”

Koskinen also admitted that going to Congress to give the agency the statutory authority to impose the regulatory scheme is also a long shot, given the current climate in Congress. In recent years, Congress has continued to chip away at the IRS’s budget, despite the fact that the agency is one of the few that pays back far more than it gets in terms of contributing to the federal budget and lowering the overall deficit.

Koskinen appears to view voluntary certification of tax preparers as the most likely route. While the requirements, like those for the Registered Tax Return Preparer Program that the court invalidated, are not likely to be as stringent as those for Enrolled Agents, who have the right to represent taxpayers before the IRS, the voluntary certification could serve to provide some assurance to taxpayers that their preparer has met some minimum standards.

“My sense is we would get a reasonable percentage of people who would be delighted to take the course or courses over time, get a certification from the IRS that they're not an Enrolled Agent, but on the other hand a certification that they've met sort of minimum standards that they might be able to market, or that people might be more comfortable going to them for,” said Koskinen.

The IRS will have to prove it’s ready to adapt to the challenge, and with a new commissioner in place, it’s already begun to show it’s making some changes this tax season and beyond. The IRS is facing not only budget constraints, but also new challenges like the Affordable Care Act and old challenges in which it has begun to make headway, like combating the threat of identity theft. With a new leader at the helm, it’s begun to reassess its priorities.

What do you think of the concept of a voluntary certification for tax preparers?

Michael Cohn is editor-in-chief of AccountingToday.com.

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