The IRS’ authority is once again being questioned. This time it’s over the Preparer Tax Identification Number (PTIN) fees that you are required to pay annually in order to prepare returns for compensation. This class action lawsuit is being filed by a pair of CPAs: Adam Steele of Bemidji of Minnesota and Brittany Montrois of Georgia.
PTINs: What’s the Point?
PTINs were created for one simple reason: as a way for the IRS to keep track of preparers and hold them accountable for compliance issues. Any tax preparer who wants to earn money preparing taxes must register for a PTIN and pay a $64.25 initial fee that must be renewed annually for $63.
PTINs are also an alternative to using your Social Security Number and exposing it to every tax client you have. In a time where identity theft and refund fraud is a huge problem, keeping your SSN out of sight is important.
What does the lawsuit challenge
The lawsuit challenges a couple of things:
- Whether or not the IRS has authority to make you pay and maintain a PTIN number.
- Whether the IRS has the right to charge the amount that they do and use the fees collected for unrelated activities.
There are 700,000 individual practitioners who pay the annual PTIN fees. That means that the IRS has collected more than $150 million since 2010. The plaintiffs claim that the IRS only uses a small portion of the fees collected to pay the vendor who manages the registration.
When the fee was set at the $63, it was in anticipation of certain expenses. Outside of the cost for the vendor who maintains the registration process, the additional revenue was to be retained by the IRS for the following three expenses:
- Costs of administering registration cards or certificates for each registered preparer;
- Costs associated with prescribing forms, instructions, or other guidance with respect to registered preparers; and
- Tax compliance and suitability checks.
The problem? None of these things are being done. So what’s with the high fee then? The plaintiffs are asking that if the IRS does, in fact have authority to charge, they reduce the fee to $13 – the actual cost of the maintenance fees the IRS incurs to keep track of the PTINs.
Allen Buckley, one of the plaintiff’s co-counsel says, as quoted in Accounting Today, “If an agency can charge U.S. citizens to fulfill a requirement, then an agency can tax. Unlawfully, the IRS has been taxing Americans.”
Stay tuned to our Tax Talk blog and social media sites for more updates on the class action suit and tell us what you think. Does the IRS have authority? Should it reduce or eliminate the fee? Leave a comment.
More Great Tax Talk:
Affordable Care Act Updates Tax Preparers Should Know About
A Sneak Peak At What’s Covered on the IRS Annual Federal Tax Refresher Course