Loving versus IRS

[DaveO]

Registration isn't the whole answer

So far this week I have seen two different prior returns prepared by attorneys, not picking on attorneys just making the point that registration isn't a cure all.
On one the attorney had taken tuition, books and lunch money for the taxpayers children enrolled in a parochial school as dependent care.
In the course of the interview the other client told me that their previous preparer told them they were allowed an automatic $11,000 deduction for charity. They offered me the receipts for the "extra".
Not to mention the TurboTax prepared return where the entire mortgage interest and property taxes was deducted on the “C”, “8829” and the “A”. When I asked about it they replied, “The program kept asking me the same question so I kept answering it the same.”

[JohnH]

This isn't the only incidence of the IRS trying to bluff their way into getting a desired outcome by writing vague and misleading rules.

Two other situations come to mind immediately, since I see so much misinformation about them on this and other forusm:

1) Tax preparer confusion over whether a payment to an Independent Contractor is deductible when a 1099 is required but not issued. (it is deductible)

2) Tax preparer confusion over whether an extension of time to file is valid when the taxpayer does not pay the balance. (It is completely valid)

[Bees Knees]

The fact of the matter is the IRS does have statutory authority to regulate unlicensed preparers under specific situations:

1) IRS has statutory authority to require unlicensed preparers to obtain PITNs [IRC §6109(a)(4)]. In September of 2013, an administrative judge ruled that a CPA could have his PTIN taken away for violating Circular 230 ethics rules (IR-2013-76). The CPA was already disbarred from practice for violating those rules. Thus, taking the PTIN away from the person as an "unlicensed preparer" was clearly within the IRS's statutory authority to regulate PTIN holders.

2) IRS has statutory authority to issue regulations concerning the requirement that unlicensed preparers furnish copies of tax returns to clients [IRC §6107(c)].

3) IRS has statutory authority to issue regulations concerning disclosure rules that require unlicensed preparers to keep tax client info confidential [IRC §6103(c) and IRC §7216(b)(3)].

4) IRS has statutory authority to issue regulations concerning the penalties imposed on unlicensed preparers who screw up a client's tax return by understating the client's tax liability [IRC §6696(c)].

5) IRS has statutory authority to issue regulations and bring proceedings involving unlicensed preparers who promote abusive tax shelters, aid taxpayers in understating their tax liabilities, or submit frivolous tax submissions [IRC §6703(a)].

[Koss]

Loving v. Internal Revenue Service

February 11, 2014

The United States Court of Appeals for the D.C. Circuit today issued its opinion on the Loving, et al case (regarding registration, fees and testing for tax return preparers), upholding the decision of the District Court. It is Case No. 13-5061. The decision is 19 pages long in PDF format and is too long to attach here. But it is an interesting and precisely written decision, and anyone interested is encouraged to read it. It should be available on the court's web site within a day or two.

The decision is very well written. It exhaustively addresses all of the arguments advanced by the IRS, and it is not difficult to understand. Here's a link, courtesy of the Wall Street Journal:

http://online.wsj.com/public/resources/documents/irsruling.pdf

BMK