Will Tax Preparers Be Regulated in the Future?


The RTRP debate is not a new topic within the tax industry.  It started on January 1, 2011 with the IRS’s enactment of new IRS Preparer Regulations requiring registration, testing and annual continuing education for previously unregulated tax preparers who prepare tax returns for compensation.  The IRS regulation introduced a new professional designation called the RTRP (Registered Tax Return Preparer). The regulations required preparer registration and included a one-time competency test, a tax compliance check and a suitability check.  This designation would earn a paid tax preparer the right to prepare and sign tax returns and claims for refund.  The regulations did not apply to all tax preparers – CPAs, lawyers, EAs and a few others would be exempt.

This regulation called into question a number of issues; but what was most contested by tax preparers was whether the IRS had the authority to regulate preparers.  Thus, the Loving vs. IRS case was filed in Federal Court.

Loving vs. IRS

The Loving vs. IRS case was initiated by The Institute for Justice on behalf of three independent tax preparers (Sabina Loving, John Gambino, and Elmer Kilian).  The independent preparers, along with The Institute for Justice, contested the IRS’s authority to regulate independent tax preparers.  The judge ruled that, in fact, the IRS has no grounds to regulate tax preparers.

The IRS has appealed this ruling, however, and in February was given the authority to re-open its online registration system (PTIN).  The court heard oral arguments from the IRS in September of 2013, but have yet to reached a decision.  Another issue that has been raised is the lack of consideration on the IRS’s part for the increased costs passed on to consumers because of the fees associated in regulating preparers. However, the Court has deemed that the IRS has the authority to charge these fees.

For a full report on the arguments made in the oral hearing, check out the article in Accounting Today here.

What the New Commissioner has to say

A new commissioner of the IRS,  John Koskiken, has been appointed since all of this has happened.  As the court decision looms, he’s recently spoken out about the RTRP debate.  According to reports, Commissioner Koskiken has stated that if the IRS loses the appeal, he would support voluntary RTRP certification and annual Continuing Education for tax preparers.

As quoted by Accounting Today (full article here), Koskiken said, “My sense is that we should be able to provide that same educational training and that background to preparers. If you can’t require it, offer it, and if you complete the information, you get a certificate that says, ‘I have completed the IRS preparer course.’ I think that could be over time very valuable to preparers, and consumers could ask preparers, ‘Have you gone through the IRS training?’ Whatever happens with the court case, we ought to be able to move forward on that and provide taxpayers with as much assurance as we can that the preparers they are dealing with have met some kind of minimum standards.”

My opinion

Since the IRS has already developed the Tax Preparer Regulation to include the RTRP and annual CE requirement at considerable taxpayer expense, I think it makes sense to salvage this effort if making it voluntary is the only way to do so.  The RTRP could still be made mandatory at some point in the future if the IRS obtains Congressional authority.  The RTRP would provide reputable unenrolled tax preparers with the opportunity to differentiate themselves from the thousands of fly-by-night tax preparers.  Although the CPA community may not like to see their competition have such a professional designation, the RTRP program would be good for the tax industry.  Tax preparers who have already passed the RTRP exam would be entitled to use that credential and would not have claims against the IRS.  Taxpayers would also benefit by having availability of this additional assurance of competency when choosing a tax preparer.  A voluntary tax preparer credential might also make it easier for additional states to regulate tax preparers who choose to not become RTRPs.

What do you think? Leave a comment below.