IRS loses lawsuit, what will happen next?

Claiming that the IRS overstepped its bounds in expanding its regulatory power to include all tax preparers who prepare and file tax returns for compensation, three bold tax preparers took the IRS to court, and won. The plaintiffs charged that the IRS incorrectly interpreted an 1884 statute that gives the IRS the authority to regulate “representatives” who “practice” before it. The IRS used that statute as the basis for introducing new regulatory requirements for all tax preparers. The judge overseeing the case in the U.S. District Court for the District of Columbia agreed with the plaintiffs, and now the fun begins.

From a public opinion standpoint, it seems that many are in favor of tax preparer regulation and support the IRS’s efforts to create fair and reasonable requirements. Supporters describe it as a positive step towards weeding out unscrupulous preparers who are committing fraud and ripping off taxpayers.

On the flip side, some view it as an additional layer of bureaucracy that is not needed, and said it will likely force many honest, hard-working tax preparers out of business due to the costs associated with compliance. They argue that other measures should be taken to address fraud, such as bolstering enforcement and issuing more damaging fines and punishments to preparers who get caught committing fraud.

So what happens now? The IRS can appeal the decision; however, the ruling appears pretty sound. Congress can step in and grant the IRS the authority to impose these regulations. But will they? They have much bigger fires to fight right now.

For the time being, it does appear that the IRS will not be able to impose these regulations.

Memorandum Opinion on the case:
http://www.ij.org/images/pdf_folder/economic_liberty/irs_tax_preparers/irs-opinion-1-18-13.pdf

Drake Software blog for tax pros, covering tax, IRS news, and more

IRS loses lawsuit, what will happen next?

IRS loses lawsuit, what will happen next?

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