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February 5, 2023

Never Fear, The U.S. Senate Is Here! (To the Rescue Tax Preparer Regulations)

Earlier this year, a DC judge threw out the IRS' ability to regulate unlicensed preparers and then, in a bit of added insult, when another judge denied the agency's request to suspend the injunction. Anti-regulation types were happy; the IRS was sad. Despite the setback, you kind of knew that the Service wasn't going to take this lying down:

The two leaders of the Senate Finance Committee, Chairman Max Baucus, D-Mont., and ranking Republican member Orrin Hatch, R-Utah, have begun developing proposals for reforming the U.S. Tax Code, including giving the Internal Revenue Service the clear statutory authority to regulate tax preparers in case the IRS loses its appeal of a recent court case invalidating its Registered Tax Return Preparer regime.
Right now these are just "proposals", but it kinda sounds like the plan is to make sure there's very little room for error: 
The legislation would “ensure that the IRS has authority to oversee paid preparers by providing clear statutory authority for the IRS to regulate tax return preparers if the IRS loses its appeal in the Loving case.”
 
“Due to tax law complexity, taxpayers increasingly rely on third parties to prepare their returns, thereby increasing their exposure to preparer misconduct or error,” said the discussion paper. “In 2011, the IRS started regulating tax return preparers by requiring registration and imposing minimum competency standards. The District Court of Washington, D.C., recently ruled (Loving, No. 12-385 (D.D.C. 1/18/13)) that the IRS lacks the authority to regulate tax return preparers. If the IRS does not prevail in its appeal of the Loving case, it will lose an important tool to increase tax compliance and protect taxpayers from unethical tax return preparers.”
Sounds like a heads-we win-tails-you-lose contingency plan.
 

 

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