Legislation Introduced to Regulate Tax Return Preparers

Post Date: 5/10/13
Last Updated: 5/13/13


Cross References
- Title 31 of the U.S. Code, Section 330
- Loving v. IRS, U.S. District Court for the District of Columbia, January 18, 2013
- H.R. 1570, Taxpayer Protection and Preparer Fraud Prevention Act of 2013

On January 18, 2013 U.S. District Judge James E. Boasberg ruled that the IRS lacks statutory authority to issue and enforce regulations under Circular 230 concerning Registered Tax Return Preparers (RTRPs), their requirement to pass a competency test, and their requirement to take annual continuing education (CE). The judge also permanently enjoined the IRS from enforcing these regulations on other tax return preparers. The IRS has appealed this court decision to the United States Court of Appeals for the District of Columbia Circuit.

Proposed legislative fix. The RTRP regulations are on their way back, even if the U.S. Court of Appeals fails to overturn the U.S. District Court decision. The proposed legislation would add the following rules to Section 330, Title 31 of the U.S. Code.

The Secretary of the Treasury may:
A) Regulate tax return preparers who do not practice as representatives of persons before the Department of the Treasury, and
B) Before licensing or certifying a person as a tax return preparer, require that the person demonstrate:
   1) Good character,
   2) Good reputation,
   3) Necessary qualifications to enable the person to provide to persons valuable service, and
   4) Competency to perform the functions of a tax return preparer.

For purposes of this section, the term “tax return preparer” has the meaning given by IRC section 7701(a)(36).

The proposed legislation also gives the Secretary of the Treasury disciplinary authority over tax return preparers in the same way they have disciplinary authority over CPAs, EAs, and attorneys. The proposed legislation also gives the Secretary of the Treasury the authority to charge a fee for licensing tax return preparers.
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