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CPAs sue IRS over PTIN fees

September 10, 2014
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CPAs and IRS seems to have trouble getting along. After the lawsuit by AICPA on IRS, Two CPAs have filed a class-action complaint against the IRS (Internal Revenue Service) challenging IRS regulations which requires the tax practitioners to register yearly and pay a fee to the agency to obtain and maintain an identification number called preparer tax identification number (PTIN).

More than 700,000 individual practitioners are participating in the class action. They all are forced to pay for a PTIN every year. The lawsuit, which was filed on 8th September, seeks an injunction to barthe collection of the fee and recover more than $150 million in fees the IRS has collected since 2010.

The regulations that are now challenged were actually issued several years ago as part of a broad IRS initiative to drastically expand its oversight of accountants, attorneys and other tax return preparers who prepare tax returns for a fee, the attorneys representing the CPAs noted. In the previous year, a federal court in Washington, D.C., ruled that many of the regulations that the IRS issued, were invalid because the IRS lacked statutory authority to issue the regulations in the case of Loving v. United States, and which was upheld by the D.C. Circuit Court of Appeals earlier this year.

The rulings invalidated the IRS’s program where mandatory testing and continuing education of tax preparers was required. Nonetheless, the courts allowed the IRS to continue to require registration of tax preparers through the PTIN, but did not rule on the question of fees. Instead, IRS has announced plans to offer a voluntary testing program instead known as the Annual Filing Season Program, but the American Institute of CPAs has filed suit to stop the program (see AICPA Sues IRS over Voluntary Program for Tax Preparers).

In order to help the IRS identify the tax preparer, the congress had allowed the IRS to use the PTIN by the tax preparers who were working for fees. The petitioner CPAs argue that the IRS lacks the statutory authority, however, to charge fees to obtain or renew a PTIN and the IRS cannot use fees it has collected for unrelated activities. The petitioners claim that a large portion of the money is being used for other IRS activities whereas only a tiny amount is used for paying the vendors managing the PTIN registration process online. Plaintiffs seek reimbursement of the fees collected by IRS in the past and injunctive relief barring the IRS from collecting similar fees in the future.

“If an agency can charge U.S. citizens to fulfil a requirement, then an agency can tax,” said plaintiffs’ co-counsel, Allen Buckley of Atlanta. “Unlawfully, the IRS has been taxing Americans.”

The other co-counsel Stuart Bassin of Washington, D.C., said, “The courts have rejected the IRS’s effort to regulate return preparers and it is time for the IRS to return the PTIN registration fees it has collected to support that effort.”


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