Loving Appeal to be Heard on September 24th

The US Court of Appeals for the District of Columbia set oral arguments for September 24th in the IRS’s appeal of Loving v. IRS. This is the case that stopped the IRS’s scheme to regulate unenrolled tax professionals. While the oral arguments were heard in September, a decision on the appeal will likely not be rendered for weeks to months after the oral arguments (probably in early 2014).

I joined an amicus curiea brief supporting the original plaintiffs (Loving, et. al.) in the case.

Meanwhile, Nina Olson, the National Taxpayer Advocate, released her annual report to Congress. While I agree with many of the items in her report (more on that in a separate post), I disagree with her on preparer regulation. Ms. Olson’s views:

The National Taxpayer Advocate believes that the district court’s decision in Loving is based in part on an outdated understanding of return preparation and filing. The return preparation industry has changed substantially over the last few decades as a result of the ready availability of return preparation software, refundable credits, and refund-based loans. These changes underscore the significance of tax return preparers in our self-assessment system and the role of the tax return in making claims against the government. In fact, the National Taxpayer Advocate believes that the problems associated with refund claims in today’s tax system are directly analogous to the problem Congress sought to address in the original 1884 grant of regulatory authority to Treasury. [footnotes omitted]

Ms. Olson is correct that the return preparation industry has changed. However, having preparers take an open-book exam, and a small amount of continuing education doesn’t make a bad preparer into a good preparer. Yes, it will weed out the lowest of the low, but that’s about all it will do in that regard. The IRS’s preparer regulation scheme will cut the supply of preparers, and that will increase the cost to individuals; that’s basic economics.

Please note that I do agree with Ms. Olson that all taxpayers should make sure that their returns are signed by the preparer, and that the preparer’s PTIN is noted on the return.

In any case, the earliest we’ll see preparer regulation is sometime in early 2014…and only if the DC Court of Appeals overturns the ruling in Loving.


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