Going to Court for Consumers
(A version of this commentary also appears on WorkForward, the blog of the National Community Tax Coalition.)
Retaining basic, common-sense regulations of commercial tax preparers is critical to protecting consumers from fraud, abuse, and incompetence, we’ve reiterated in court papers filed last week.
The National Community Tax Coalition (NCTC) joined the National Consumer Law Center in filing an amicus curiae (“friend of the court”) brief on April 5 in the U.S. Court of Appeals for the District of Columbia Circuit. Our move comes in support of the IRS attempts to reinstate paid-preparer rules recently struck-down by a lower court decision.
“Without such regulation, consumers are at the mercy of an industry with no minimum training or competency standards for one of the most critical financial transactions that consumers engage in every year,” according to the amicus. “… (C)onsumers may become the victims of incompetence or fraud by preparers through no fault of their own, yet taxpayers are ultimately responsible for wrongly prepared tax returns.”
The brief cites examples of such problems, which the rules were designed to help curb among paid preparers – people who handle taxpayers’ most sensitive financial information. The regulations – which the IRS had been phasing-in since 2009 – include registration of paid preparers, mandatory training, a competency exam, certification and continuing education to ensure preparers remain versed in the details of ever-changing tax laws.
However, several commercial preparers sued the IRS to stop the regulations. A judge for the U.S. District Court for the District of Columbia decided that the IRS lacked the statutory authority to impose such standards, and halted the rules just as tax season began in January.
The IRS disagreed, and appealed that decision in February. It remains unclear exactly when the case could be argued before the appellate court.
In addition to the NCLC-NCTC amicus, five former IRS commissioners have filed a brief arguing the IRS does, indeed, possess the proper legal authority for such regulations.
Some commercial preparers maintain that compliance with the regulations was too expensive. However, the consumer advocates’ amicus notes paid-rep registration cost less than $65 and a competency exam cost less than $120, compared with the hundreds of dollars in fees that a preparer can charge a single client.