It only took a couple of years but there is a lawsuit in the making over the licensing of tax preparers. According to an article on Smartpros, the Institute of Justice is planning on filing the suit on the behalf of three tax preparers this week. They are alleging that the IRS doesn’t have statutory authority to require licensing without Congressional approval. Maybe they need to look again.
In the original report issued in January of 2010, Pub 4832, IRC section 6109 is cited as to why the IRS doesn’t need Congress to require licensing. Specifically look at 6109(a)(4):
Any return or claim for refund by a tax preparer shall bear such identifying number for securing proper identification of such preparer, his employer, or both, as may be prescribed.
The IRS has chosen to prescribe the PTIN as the identifying number and set the requirements to obtaining that number. Remember, once the phase in is completed a preparer can’t get a PTIN without passing the test and undergoing a background check. The continuing education is required to renew annually.
Besides the statutory authority argument, the lawsuit argues that licensing will reduce consumer options and increase prices. Let’s look at cost for a minute. The test is one time only and runs about $100. Annual renewal of the PTIN registration is $65. My CPE costs averaged $19 per hour last year. So, estimate $25 for 15 hours for $375 total. That’s a total of about $540 for the test year and $440 for other years. The plaintiffs seem to average 100 returns a year. That makes an average increase per return due to maintaining licensing $4.40 to $5.40. Not that bad of a price increase. As for the decrease in options because preparers will leave the field, if they can’t pass the test, they shouldn’t be in the field. If they aren’t willing to keep up on tax laws with continuing ed, they should get out of the business. Sorry no sympathy from me.
There are tax pros who don’t like the idea of licensing. I understand that. But this lawsuit seems to be more for the attention.. As I see it, if there was a solid legal argument against preparer licensing a lawsuit and/or injunction would have been filed long ago.