The decision by the IRS to institute the Registered Tax Return Preparer (RTRP) program got a mixed reception. Registering for a PTIN, studying and taking the RTRP exam, and obtaining CE credits was viewed as time consuming, expensive, and unnecessary by some, while others thought that holding tax preparers to a higher standard in order to weed out unscrupulous or less competent preparers was a great idea. As you know by now, a trio of determined independent tax preparers took the IRS to court, claiming it did not have the authority to impose RTRP requirements. A judge agreed, and the fun began.
The IRS immediately announced its intention to appeal, and asked the judge to suspend the ruling, arguing the injunction would interrupt tax season. That request was denied. The judge did clarify his ruling, saying that the IRS could re-open the PTIN registration service, and that tax preparers could voluntarily take competency tests and CE courses. The bottom line was still the same, however: in the judge's opinion, the IRS had no authority to force preparers to follow its RTRP regulations. So, the IRS filed another Motion for Stay Pending Appeal in the D.C. Circuit Court of Appeals. It battled with the preparers as both sides issued documents that reiterated their points. On Wednesday, March 27, the D.C. Circuit Court of Appeals denied the IRS's request. Strike two or strike three, depending on how you look at it, but the IRS is definitely not out. Not yet.
Although it may seem to many that those who took the IRS to court succeeded in proving their point, this case probably will not stop the IRS in the long term from enforcing some type of regulations on tax preparers. Some believe it is just a matter of time before Congress steps in. The IRS has invested millions in this program, which gives Congress millions of reasons to come to the rescue. Leaders of the Senate Finance Committee have already batted around proposals that would definitively give the IRS the authority it thought it already had.
So, the real question might be, when will Congress act? "Taking action" hasn't proven to be Congress' strong point over the last 12 months. In fact, it was just a few months ago when the IRS had to wait until the last minute (and then some) for Congress to pass the extender legislation, which led to an unprecedented delay to the filing season. It's not unreasonable to think this might also take a while, especially since it is sure to get wrapped up in a larger "tax reform" bill, one of the most contentious areas of debate for the split 113th Congress.
Rather than wait for an act of Congress (literally and figuratively), should the IRS consider moving forward with an optional RTRP certification? True, in a way, the IRS would be admitting defeat. And, some of the goals of the RTRP, such as weeding out unscrupulous and unethical preparers, would be more difficult to attain if the IRS can't require all preparers to pass a test and obtain CE. However, if the RTRP certification is marketed by the IRS to American taxpayers as a symbol of credibility, ethics, and expertise, would it not provide a competitive advantage to those who are certified? Would the competitive advantage not force most preparers to obtain the certification? Do you feel your business would suffer if the majority of preparers in your area chose to participate in an optional RTRP program and you didn't?
It will be interesting to see what the IRS does if the end of the summer arrives with no Congressional action on the RTRP.