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.