Court denies IRS authority to regulate preparers…I’m NOT Loving it.

In a surprising turn of events, a federal district court granted an injunction in the case of Loving v. Internal Revenue Service that blocks the IRS from requiring tax return preparers to pass even the most basic standards of competency.

In this day and age where the person who cuts your hair or even walks your dog is probably required to have some sort of license, it seems utterly absurd that the person who prepares and files your tax return — an activity that often represents the largest single financial transaction each year for most people — is not required to be licensed in any way or demonstrate any level of basic competency. The IRS has agreed on this point for some time and began taking action to change this situation a couple years ago.

However, it appears some people believe the very minimal requirements set by the IRS are too much of a burden to ask of people who play such a large role in the financial lives of so many people. To be clear, what the IRS has required is extremely minimal. When fully implemented, the program would require professional preparers to pay an annual registration fee and complete some continuing education hours each year. All in all, the annual cost could be as little as $100 or less, with the burden of staying up to date with continuing education adding about 20 hours of study time. Considering the many complexities of the tax code and the fact it’s constantly changing, this hardly seems an unreasonable burden.

So for the time being, the best advice if you’re going to seek professional assistance with your taxes is to look for an Enrolled Agent or CPA. (There are a very small number of states–I know Oregon and California are among them–that have long required tax preparers to be licensed and demonstrate basic competency…so if you live in a state with such requirements you’re in luck.) And let’s hope the courts come around and see the rationality of requiring basic competency from the people whose work can have such a huge impact on people’s financial lives.


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