Loving: Who Can the IRS Regulate?
Law360.com, Dec. 6 2013
4 Pages Posted: 20 Mar 2017 Last revised: 14 Aug 2018
Date Written: December 16, 2013
Abstract
In 2011, the Internal Revenue Service (IRS) amended its regulations of practice before the IRS. Previously, Circular 230 regulated only attorneys, CPAs, and “enrolled agents” (who pass a special examination to allow them to represent taxpayers). But for several years Congress and the National Taxpayer Advocate had expressed serious concerns with hundreds of thousands of individuals who prepare tax returns but are not attorneys, CPAs, or enrolled agents. Several studies and audits confirmed that tax return preparers who were incompetent or unscrupulous created significant problems for not only the government but also the taxpayers whose returns they prepared. The new 2011 regulations established requirements for registration, a certification test, and continuing education for these tax return preparers. But in Loving v. Internal Revenue Service, the district court for the District of Columbia invalidated the new regulations as beyond the scope of the authorizing statute. Preparing a tax return was not, in the court’s opinion, “presenting a case” to the IRS. This article argues that the court’s decision was incorrect, as the text of the authorizing statute is sufficiently ambiguous to encompass the regulations issued by the IRS. It further points out the possible effect of the court’s interpretation of the statute on other practitioners whom the IRS regulations. Circular 230 also regulates actions by other practitioners concerning the preparation of tax returns. The regulation of written advice might also be subject to question, as it also does not involve “presenting a case” if – as is often the case – it is provided before the client files a tax return.
Keywords: Internal Revenue Service, IRS, Circular 230, tax return preparers, practitioners, regulation, practice before the IRS, Loving
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