The IRS may be the easiest governmental agency for taxpayers to dislike but their recent move to register tax preparers has many in the accounting profession unhappy.
In February 2014 the IRS lost an appeal in Loving, No. 13-5061 (D.C. Cir 2/11/14). That decision held that the IRS does not have the statutory authority to regulate tax return preparers On June 26, 2014, the IRS announced a new voluntary program for tax return preparers called the Annual Filing Season Program. The program is intended to be in place for the filing of calendar year tax returns in early 2015. Those preparers who voluntarily register with the IRS and complete 18 hours of continuing education, 6 hours refresher course per tax season, 10 hours of federal tax law and two hours of ethics. Registrants must also agree to comply with IRS Circular 230, Regulations Governing Practice before the Internal Revenue Service. Because of the introduction mid-year, the IRS plans to require only 11 hours of continuing education in 2014. Before the Loving decision the IRS had attempted to regulate tax return preparers and 62,000 return preparers had been registered. Those preparers will be exempted from the six hour refresher course requirement for 2014.
The IRS is building a website directory for release in early 2015 that will include enrolled agents, attorneys, CPAs, enrolled retirement plan agents and enrolled actuaries. These new registrants will be permitted to represent clients in matters with the IRS along with CPAs, attorneys and enrolled agents.
Because of the short time to get new voluntary registrants through the training in 2014, the IRS introduced the new rules with no public comment.
On June 25, 2014, the AICPA’s chairman, William E. Balhoff and Barry Melancon, the President and CEO of the AICPA, raised a number of concerns about the program in a letter to the IRS. Those concerns include:
- No statute authorizes such a program, and “because federal agencies may act only pursuant to a valid delegation of authority by Congress, the IRS may not implement the proposed program”;
- The program will be viewed as a way to circumvent the federal court’s Loving decision;
- The way the IRS has developed the proposed program does not comply with the notice and comment requirements of the Administrative Procedure Act, since the program will be “de facto mandatory”; it violates the Paperwork Reduction Act, since the IRS has not sought approval from the Office of Management and Budget before collecting personal information from tax return preparers; and it probably will require the IRS to perform a cost/benefit analysis of the program and alternatives and get approval from the Office of Information and Regulatory Affairs, since the program is likely to be considered a “significant regulatory action” that must comply with Executive Order 12,866.
- The proposed program is “arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers who defraud their clients, runs counter to evidence presented to the IRS, and will create market confusion.”
The letter called the program “unlawful and improper”.  The IRS does have an obligation to protect the public but it has no legal authority to regulate tax return preparers. The public will likely be confused by the array of tax professionals and registered preparers. We already have CPAs, attorneys and enrolled agents. Many tax professionals are concerned that the limited education and continuing education requirements are insufficient for the unenrolled agent registrants. Ohio CPAs are required to have a minimum of 40 hours of annual continuing education and in most states they have to have a master’s degree, years of experience and pass an extensive state administered exam before being licensed as CPAs by their state. Attorneys must have a law degree, pass the state bar and maintain their state license with professional education. Both groups are also subject to peer review processes which enforce the standards of ethical conduct on licensees. We can expect additional legal challenges like Loving, which could throw this program into even more confusion. As some of the online chatter has emphasized, the public would be better served if the IRS would improve training for their personnel and provide easier access to competent assistance.  JournalofAccountancy.com “AICPA reiterates its strong concerns about IRS voluntary certification program”, published 6/24/14 by Alistair M. Nevius, editor-in-chief, tax of the Journal of Accountancy, accessed 7/2/14  JournalofAccountancy.com “AICPA reiterates its strong concerns about IRS voluntary certification program”, published 6/24/14 by Alistair M. Nevius, editor-in-chief, tax of the Journal of Accountancy, accessed 7/2/14