Here Comes the Judge: New Ruling for Registered Tax Return Preparers

On Friday January 18, 2013, Judge James E. Boasberg of the United States District Court for the District of Columbia struck down the IRS’s Registered Tax Return Preparers (RTRP) program and enjoined the IRS from enforcing the regulations.

The Court’s Decision

• Boasberg ruled against the IRS and in favor of the unenrolled tax preparers. The ruling eliminates the requirement for unenrolled tax return preparers to pass the RTRP examination or to obtain 15 hours of continuing professional education each year in order to prepare income tax returns for pay.
• The ruling states that tax return preparers are not “representatives who practice before the IRS.” The court equated “practice” with advising and assisting taxpayers in presenting their cases before the IRS, and filing a tax return would not be described as “presenting a case.”
• The ruling also granted permanent injunctive relief, enjoining the IRS from enforcing its regulation scheme against unenrolled tax preparers.

Options for the IRS

The IRS has the following options:
• Abandon any further attempts to regulate unenrolled tax preparers.
• Appeal the judge’s ruling.
• Seek congressional statutory authority to regulate RTRPs.

Options for the Unenrolled Tax Preparer

RTRP’s have the following options:
• Go about business as usual with no need to pass the RTRP exam or obtain the required continuing education.
• Continue to comply with the RTRP regulations voluntarily.
• Become an Enrolled Agent.

The court ruling striking down the RTRP regulations does not have any effect on the IRS’s Preparer Tax Identification Number (PTIN) requirements. All paid tax return preparers will still have to obtain their PTIN each year.
If you plan to, or have already become an RTRP, I would recommend that you voluntarily take the 15 hours of continuing education each year. If the IRS does obtain the authority to regulate unenrolled tax preparers (which I believe is the likely outcome), you will be ready and up-to-date on the latest tax laws.

Here at Thomson Reuters, we have created courses, webinars, and a subscription package designed specifically to meet RTRP regulations. Regardless of the outcome of this ruling, we are happy to have developed products that are customized specifically for tax return preparers who need clear and succinct update training to meet the needs of their clients each tax season.

I think the IRS will probably seek congressional statutory authority to regulate RTRPs; however, with Congress’s lack of ability to pass any meaningful legislation it may take a very long time. What do you think?