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AICPA loses legal round in IRS tax pro regulation fight

One of the things I always suggest to folks who are having tax trouble, be it with filling out a return or dealing with Internal Revenue Service questions about an already filed 1040, is to consult a tax professional.

Man seeking tax help_iStock_000002861804_XSmall

By tax professional, I mean a qualified, reputable person who's up to date on the tax laws and who will help clients comply with them in a legal way that also produces the lowest possible tax liability.

Every tax pro I know personally falls into this category. So do, based on what I've read by and digitally discussed with them over the years, a lot of the tax pros I've met online.

But all it takes is one bad tax preparer to mess things up for the good ones. There's disagreement, however, among the professional tax preparer community, Congress and the IRS about what to do about the less-than-stellar tax preparers.

Good arguments for both sides are made by a couple of those tax pros I know digitally. Robert D Flach, a professional tax preparer for 40+ years and The Wandering Tax Pro blogger, is for some regulation. Joe Kristan, a CPA and principal author of Roth & Company's Tax Update blog, is against additional regulation. (Bob and Joe, if you've changed your minds or have more recent arguments/posts about the preparer regulation effort, let me know and I'll link to them, too.)

From mandatory to voluntary: The IRS tried to institute a mandatory regulation method that included registration and continuing education requirements for tax preparers who aren't already required, by virtue of where they live (a handful of states regulate tax pros) or their professional affiliations (CPA, Enrolled Agent, attorney) that already required certain qualifications.

That effort was halted by a court challenge, Loving et al vs. IRS.

So the IRS opted for voluntary credentialing, officially known as the Annual Filing Season Program (AFSP).

Now AFSP also is facing legal challenges.

Back to court: The most notable opposition comes from the American Institute of Certified Public Accountants (AICPA), which in 2014 filed a lawsuit to stop the IRS' voluntary annual-filing-season program for unenrolled preparers. AICPA contends that IRS' voluntary tax preparer education program is simply an effort to get around the loss it suffered in the Loving case.

This time, though, the IRS is -- so far -- winning.

A federal district court threw out AICPA's case. An appeals court reversed that decision and reinstated the case. And on Aug. 3, the district court again sided with the IRS

The latest court finding is that while the AICPA showed a competitive injury, its grievance did not fall within the zone of interests protected by 31 U.S.C. section 330(a). I'll let the lawyers duke that one out.

In the meantime, though, I'd like to hear from all y'all -- including Bob and Joe again -- about what you think as far as tax preparer regulation.

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Registration is not needed and likely would be an overkill when implemented by the IRS for people who mostly practice with the 1040EZ market. IRS systems should screen all returns equally regardless of the source of preparation, thus who prepared the return would not be relevant . Threatening lax preparers with massive fines (see EIC audit stats on preparer penalties) is just a way for the IRS to say it is doing its job to improve the system without doing its job to the extent it should. Taxes and forms should be simple enough for a person to do it himself/herself without 20 hours of education. Unless the IRS figures out a way to make the brother-in-law take CPE before helping sis-in law with her taxes, it should address tax system improvement from a different approach.

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