I have joined an “amicus” brief to the D.C. Circuit Court of Appeals on the Loving case against the IRS preparer regulation regime. Also on the brief are boggers Russ Fox and Jason Dinesen, as well as The Tax Foundation.
The IRS is appealing the district court ruling rejecting their power grab over preparers. Accounting Today reports:
The brief argues that the IRS violated the APA’s arbitrary and capricious standard in issuing the regulations, for example, by engaging in a flawed cost/benefit analysis under Executive Order 12866 in rejecting alternative approaches. “The IRS ignored the increased costs to consumers of tax-return preparation services in making this analysis,” said the brief.
As an Enrolled Agent, Mr. Dinesen is not directly affected by the regulations. Nevertheless, Mr. Dinesen believes the regulations would have an indirect adverse effect on his business (and on Enrolled Agents generally) because the Registered Tax Return Preparer designation created by the regulations would have the effect of diminishing the value of the Enrolled Agent designation in the market for tax-preparation services, largely because the number of Registered Tax Return Preparers would be substantially greater than the number of Enrolled Agents.
Next to consumers, I think enrolled agents are the folks most harmed by the regulations. The RTRP designation would make it very difficult for EAs to market their much higher level of credentials.
Russ Fox is also an enrolled agent, but he raises different points:
As an Enrolled Agent, Mr. Fox is not directly affected by the regulations. Nevertheless, based on his extensive experience in tax practice, he has a number of objections to the regulations. In addition to the defects in the regulations described by the district court, the plaintiffs-appellees, and this brief, Mr. Fox objects to the regulations because the IRS already has ample statutorily authorized tools to apply against incompetent or unscrupulous tax-return preparers; because the regulations will not be effective in eliminating incompetent or unscrupulous tax-return preparers; because they will give a tacit stamp of approval to preparers who are not competent; because they will have the effect of driving many low-volume tax-return preparers out of business, thereby increasing the cost of tax-return preparation services for the clients of those preparers; and because administering the regulations will require scarce IRS resources that could be better used for other purposes, such as combatting identity theft.
He is correct, in my view.
Mr. Kristan objects to the regulations because they will reduce options for consumers of tax-preparation services by driving many low-volume but competent and conscientious tax-return preparers out of business because of the cost of compliance with the regulations; will increase the compliance cost and burden on low-volume tax-return preparers that remain in business; will increase the cost of tax preparation services without increasing the value of those services; will prompt some low-income individuals to resort to tax-return preparers who will evade compliance with the regulations; will prompt some low-income individuals to prepare their own returns, rather than using paid preparers, resulting in less accurate returns; will prompt some low-income individuals to cease filing altogether; will adversely affect Enrolled Agents by diminishing the value of their Enrolled Agent designation; and will likely ultimately be extended to CPAs, attorneys, and Enrolled Agents.
After the revelations regarding the IRS treatment of the administration’s political opponents, why would anyone think it wise to let the IRS regulate preparers? It makes as much sense as having prosecutors regulate defense attorneys.