Court to IRS: Sit Down, Shut Up, and Leave Mom-and-Pop Tax Prep Firms Alone



If you have a neighborhood guy or gal who helps you sort your receipts every April, you'll be happy to know they can breathe a little easier this tax season.

In 2012, the IRS decided unilaterally to impose new continuing education and licensing requirements on tax prep companies, threatening to put little guys out of business, while protecting giants like H&R Block.

The libertarian legal outfit Institute for Justice (IJ) helped mom-and-pop tax prep firms challenge the new regs, and despite some time in legal limbo, they've been winning their way up the legal chain

In my inbox today, this good news from IJ: 

Today, the D.C. Circuit Court of Appeals ruled that the IRS had no legal authority to impose a nationwide licensing scheme on tax-return preparers.  The decision affirms a January 2013 ruling by U.S. District Court Judge James E. Boasberg, which struck down the IRS's new regulations as unlawful.  Both courts rejected the agency's shocking claim that tax-preparer licensure was authorized by an obscure 1884 statute governing the representatives of Civil War soldiers seeking compensation for dead horses.

Here's what the D.C. Circuit Court had to say:

"the IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of [the statute]."

This is pretty much the judicial equivalent of shouting "BOOM" and dropping the mic.

And rightly so. If the new rules had been enforced, they would have endangered the livelihoods of tens of thousands of small businessmen and entrepreneurs, not to mention the sanity of thousands of people who might have started prepping their taxes on their own.

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  1. This was a really, really nasty power grab from the IRS with the collusion of the big tax prep firms. It was Guild Practices 101; an attempt to force all tax prep to gatekeeper-approved CPAs and the like. It’s already bad enough for accountants trying to get a CPA or lesser certifications (and expensive as hell); this would have made it far worse.

    Fuck the IRS.

    1. Also, the big tax firms…

  2. Let’s see if you defend mom and pop return mills when they fight tooth and nail to stop U.S. Tax Code reform.

  3. Shouldn’t the IRS also be subject to continuing education?

  4. Licensing requirements simply ensure that the tax preparations service you receive meets a minimum standard, as arbitrarily determined by the IRS. The fact that it bars entry to competition is irrelevant. And, oh yes, paying taxes is patriotic.

    1. Obamaphone, is that you?

  5. “the IRS may not unilaterally expand its authority through such an expansive, atextual, and ahistorical reading of [the statute].”

    You could say the same thing about many, many agency rulemaking exercises. Of the small sample that I have seen, they are much more likely than not to go beyond, even far beyond, their statutory authorization.

    Exhibit A: The HIPAA privacy rules. Outside of a narrow class of electronic data exchanges between providers and payers, CMS has no statutory authority to write privacy rules.

    1. Look, if you don’t like it, all you have to do is engage in multi-million dollar litigation, with the deck stacked in the agency’s favor.

    2. Or your local “Conservation Regulatory Committee”

  6. This is pretty much the [insert here] equivalent of shouting “BOOM” and dropping the mic.

    Please don’t write this sentence ever again, Ms. Mangu-Ward. You’re not 14 years old, nor are you posting something on your social media.

    1. That’s the blog comments section equivalent of yelling “LAAAAME” from the back of the audience.

  7. Got this in an email from the IJ earlier today. Always doing things to make me feel good about my donations to them, they are.

  8. So do I get to sue them for my fucking $63 a year BS return signer fee?

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