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IRS Loses Appeal: Loving V IRS Case Update

In response to the September 2013 IRS appeal, the U.S. Court of Appeals ruled today that the agency has no authority to require tax return preparers to pass competency exams, pay annual fees and complete at least 15 hours of continuing education courses each year.

The unanimous ruling from the federal appeals court in Washington supports a January 2013 ruling by U.S. District Court Judge James E. Boasberg, which concluded that the IRS lacked the authority to impose new rules without congressional authorization.

Both courts overruled the IRS’s intent to regulate tax preparers based on the “Horse Act of 1884”, a statute governing the representatives of Civil War soldiers to stop suspicious claims for highly valuable property, often missing or dead horses.

The appeals court held, “If we were to accept the IRS’s interpretation of [the statute], the IRS would be empowered for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-preparation industry. Yet nothing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority.”

The Institute for Justice challenged the regulations claiming that they were unfair and would have put thousands of mom-and-pop tax preparers out of business.

“This is a major victory for tax preparers—and taxpayers—nationwide,” said Dan Alban of the Institute for Justice, the lead attorney for the three independent tax preparers who filed the suit. “The court found that Congress never gave the IRS the power to license tax preparers, and the IRS cannot give itself that authority.”

We can now conclude that the IRS did not make enough of a case to convince the court to overturn the prior decision.  And it looks like the newly approved IRS commissioner, John Koskinen, saw it coming. He recently stated that he would support voluntary certification for tax preparers if the Internal Revenue Service fails to win the appeal. 

Topics: Industry, Tax Updates, ERO, Tax, tax preparer, IRS

     

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