Posts Tagged ‘Katherine Mangu-Ward’

Court throws out IRS preparer regulation scheme!

Friday, January 18th, 2013 by Joe Kristan
Soon-to-be-former-IRS Commissioner Douglas Shulman

Doug Shulman shows what’s left of his signature achievement, the preparer regulation scheme.

So passes Doug Shulman’s legacy:

For the reasons set forth in the accompanying Memorandum Opinion, the Court ORDERS that:

1. Plaintiffs’ Motion for Summary Judgment is GRANTED;

2. Defendants’ Motion for Summary Judgment is DENIED;

3. Defendants lack statutory authority to promulgate or enforce the new regulatory scheme for “registered tax return preparers” created by 76 Fed. Reg. 32,286;

4. Defendants are permanently enjoined from enforcing such scheme; and

5. Judgment is ENTERED in favor of Plaintiffs.

The IRS can, and almost certainly will, file an appeal to preserve its preparer regulation power grab, but losing on summary judgment and being enjoined from enforcing the new rules is a complete shutout for them in District Court.

I am glad that the IRS lost in court.  I have hoped the regulations would be overturned, and I thought they should be illegal, but I am not a master of the law covering IRS regulatory problems.  Regardless of whether they are legal, I have always thought the regulations unwise.

The regulations have been sold as a way to assure taxpayers of quality preparation by making them pass a test and take CPE.  Yet the test is a joke, an open-book review of Publication 17.  The IRS has already waived the CPE requirement for 2013.  The IRS has already undermined their own arguments.

To me, the real purposes of the regulations have been:

  • to expand the power of the IRS by increasing their grip on preparers, while
  • helping the well-connected national tax franchise outfits by eliminating many of the small independent preparers who compete with them.

Too cynical?  Seeing that the IRS has abandoned its stated goals, the unstated goals are all that are left.  Considering that the former CEO of H&R Block wrote the rules for the IRS, it’s hard to make the case that this was done with the taxpayer in mind.

What does it mean?  It looks to me that the IRS has to stop its RTRP regime in its tracks, absent a stay on the ruling from the District Court or the D.C. Circuit Court of Appeals.  No more rulemaking, no more RTRP open book tests, and no more approval of tax CPE by the IRS.  No more cashing the $63 RTRP checks.  Refunds?  It would serve them right, but I don’t know.

Meanwhile, it’s back to the Wild West days of two years ago, when taxpayers had to rely on the reputations and credentials of individual preparers, rather than on a worthless pretend certification from the IRS.  Oh, the humanity!  Congratulations for the Institute for Justice, the legal team behind the suit.

UPDATE, 1/21: more here.

Other coverage:

Katherine Mangu-Ward, Mom-and-Pop Tax Prep Firms Defeat IRS! (

AP, IRS loses lawsuit in fight against tax Preparers.

Related: David Brunori, Government Power, Cronyism, and the IRS Running Amok

UPDATE, 1/19. 

TaxProf, Court Says IRS Lacks Authority to Regulate Tax Preparers

Russ Fox, Institute for Justice 2, IRS 0

Joseph Henchman, Court Strikes Down IRS’s Arbitrary Tax Preparer Licensing Requirements  (Tax Policy Blog)

Kay Bell, IRS loses lawsuit challenging tax preparer registration, testing

Robert D. Flach, YOU COULD HAVE KNOCKED ME OVER WITH A FEATHER!, MORE ON THE TAX PREPARER REGULATION COURT CASE, AND THE BEAT GOES ON . . .  I like this: “Joe Kristan is as expected, a pig in reality tv over the court decision.”  If he calls me “Snooki,” I’ll know he’s really upset.

Trish McIntire, “Licensing Pity Party

Janet Novack, Federal Judge Shoots Down IRS Attempt To Regulate All Paid Tax Preparers

Some practitioners are upset about the ruling (see Trish McIntire).  None of us should have the right have the government  lock potential competitors out of the market — even if we don’t think the competitor is adequately trained.  It’s the customers’ money, and it’s up to them to make the choice.



IRS quietly delays CPE requirement under new preparer regulation scheme.

Wednesday, January 9th, 2013 by Joe Kristan

In a quiet admission of failure, the IRS Return Preparer Office posted on its Facebook page that it won’t be enforcing the new 15-hour CPE requirement for Registered Tax Return Preparers this year:

We’ve received some questions from people who didn’t get their 15 hours of CE completed in 2012. Here’s the deal: In addition to the 15 hour requirement for 2013, you must also make up any hours not completed in 2012. There is no need to designate or notify us that hours earned in 2013 are for 2012. Be sure to keep records of the programs you attend. Additionally, for those people who answered “no” to  the CE requirement question on their PTIN renewal, we will be sending them a letter soon advising them they are still responsible for the hours.

There are about 370,000 tax preparers that the IRS estimates are covered by the new rules.  The whole regulation scheme was a stupid idea anyway, except as a power grab by Doug Shulman, Worst IRS Commissioner Ever.

The rules will do little or nothing to improve the quality of tax return preparation.  By driving seasonal preparers out of the market, they will raise prices.  At the margin, that will cause some taxpayers to self-prepare, and others to not file at all.  That does nothing for the taxpayer, except for taxpayers who are shareholders in the nationwide tax return franchise businesses that are the real beneficiaries of the rules.

The Institute for Justice lawsuit against the regulation scheme is pending.  Katherine Mangu-Ward has more in New IRS Rules Kick In, Leaving Mom-and-Pop Tax Preparers in Limbo (


Lawsuit draws attention to IRS preparer regulation power grab

Wednesday, March 14th, 2012 by Joe Kristan

The Institute for Justice lawsuit has drawn much-deserved attention to IRS Commissioner Shulman’s inane and wasteful preparer regulation initiative. For example, Instapundit links to Katherine Mangu-Ward:

Readers get no points for guessing who backed the regulation. H&R block, and other big tax prep firms were in favor of the rule. Attorneys and certified public accountants are exempt from the requirements. As with many kinds of regulation, relatively low compliance costs for the big boys can be ruinously high for the little guys.

Of course, those of you astute enough to follow the Tax Update have known about this for a long time. Stay on the bleeding edge with the Tax Update!


Yes, I favor both free ice cream and free beer

Friday, February 12th, 2010 by Joe Kristan

Asked whether a six-week vacation in Cancun starting right now would be a good idea, a majority of Iowans would surely vote “yes.” But if you then asked if it would still be a good idea if it meant they would lose their jobs and move into a homeless camp by the river, support would decline.
So it is with today’s Des Moines Register Poll showing Iowans in favor of film tax credits even though the program has ground to a halt in scandal and corruption. The poll shows 61 percent of respondents in favor of film tax credits.
Here’s how the poll asked the question:

Now, I’d like to ask about tax credits to movie productions. Overall, do you think tax credits to companies that produce movies in Iowa would be good for the state or bad for the state?

The problem with that question is the same as the problem with the vacation question — It doesn’t say anything about a cost. If it’s free, who wouldn’t be for it? It’s too bad the Register didn’t follow up:

Would you still favor the film credits if they cost every Iowan $26? What about $121?
Would you favor the film credits if it meant firing 1,000 teachers?

The same thing applies to another “finding” of the poll – majority support for business tax credits, though only at a 51 percent level.
This is why “issue” polls aren’t very useful: they ignore the trade-offs. You probably can’t have both a long warm vacation right now and keep your job and house (if you can, why are you here?). The Pew Research Center did a poll that illustrates this. Katherine Mangu-Ward summarizes the findings:

The Pew poll [PDF] inquired about 20 different issue areas, ranging from “dealing with the problems of the poor,” to “strengthening the military,” to “reducing the budget deficit.” For virtually every issue, the combined total of people who chose “top priority” or the second-highest option