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Post Date:  11/5/2014
Last Updated:  11/5/2014

Summary
Cross References
- American Institute of Certified Public Accounts, DC District, October 27, 2014

The IRS has statutory authority to regulate the practice of representation before the IRS. Tax practitioners generally subject to these regulations include CPAs, attorneys, and enrolled agents (EAs). Unenrolled tax-return preparers have historically not been subject to regulation by the IRS. In June 2011, the IRS issued regulations in an attempt to include unenrolled preparers under its authority to regulate. The IRS attempted to implement rules whereby unenrolled preparers would have to become Registered Tax Return Preparers (RTRPs) in order to continue to practice as tax-return preparers. As a result of these regulations, a lawsuit was filed against the IRS claiming it had no statutory authority to regulate unenrolled preparers. The IRS lost in District Court, and the D.C. Circuit Court of Appeals upheld the District Court decision. (Loving, U.S. Court of Appeals for the District of Columbia, February 11, 2014)

As a result of this loss, the IRS is in the process of continuing the concept of regulating unenrolled preparers through a voluntary program called the Annual Filing Season (AFS) program. Under this voluntary program, unenrolled preparers who participate will receive a certificate of completion and have their names included in a national registry that informs the public that they have completed a specified number of hours of continuing education (CPE) for the year.

On July 15, 2014, the American Institute of Certified Public Accountants (AICPA) filed suit against the IRS alleging that the voluntary program constitutes arbitrary and capricious agency action promulgated in excess of the agency’s statutory authority. The AICPA claimed that its members:
- Employ unenrolled preparers who will be injured by the additional regulatory burden created by the AFS rules,
- Will be directly injured by the AFS rules because they require CPA firms to take reasonable steps to ensure that their newly regulated employees comply with Circular 230, and
- Will suffer injuries because the rules will cause confusion among consumers.

Under the theory that AICPA member employees may be injured, the court said there is no reason to believe that the alleged injuries could be characterized as anything but voluntarily self-inflicted. CPA firms are under no obligation to reimburse employees for the costs of voluntary compliance, nor are they obligated to credit the time employees spend voluntarily complying with the program as hours worked on behalf of the firm.

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