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Court upholds injunction; IRS reopens PTIN system

 

By Paul Bonner and Alistair M. Nevius, J.D.
February 3, 2013

The IRS announced on its Return Preparer Office Facebook page on Saturday that it has reopened its preparer tax identification number (PTIN) system for new applications and renewals. The announcement follows a clarification from the district court that struck down the IRS’s return preparer registration program, saying that the injunction it issued does not affect PTINs (Loving, No. No. 12-385 (JEB) (D.D.C. 2/1/13) (memorandum and order).

The U.S. District Court for the District of Columbia refused to stay its injunction and stated that “no tax-return preparer may be required to pay testing or continuing-education fees or to complete any testing or continuing education unless and until this injunction is stayed or vacated by the Court of Appeals” (memorandum and order, p. 7). However, the court also stated that “the IRS is not required to suspend its PTIN program, nor is it required to shut down all of its testing and continuing-education centers” (id.).

The court granted the injunction on Jan. 18 (see “Federal Court Strikes Down IRS Tax Return Preparer Registration Program”) and struck down the program as exceeding the IRS’s statutory authority to regulate taxpayer representatives practicing before the IRS. The IRS on Jan. 23 filed a motion in the same court to suspend the injunction (see “IRS Files Motion to Suspend Injunction in Return Preparer Regulation Case”).

The IRS soon after the decision issued a statement saying tax return preparers covered by the program (which do not include CPAs, enrolled agents, or attorneys) are not currently required to register with the IRS, pass the program’s competency test, or obtain continuing education. It also removed links to the PTIN registration system from its “Tax Pros” webpages.

On Friday, the AICPA wrote the IRS, urging it to quickly address the PTIN situation, saying any additional delay could further compress tax season. The AICPA’s letter, signed by Jeffrey A. Porter, CPA, chair of the AICPA Tax Executive Committee, noted that, as of Friday, both the IRS’s online PTIN application system and Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal, were unavailable.

“This has left a number of our members unable to comply with the requirement to affix a valid PTIN to the returns they prepare,” Porter wrote. This inability could further compress members’ work schedules, which are already tightened by the IRS’s delay in its ability to accept returns with any of 31 forms and schedules.

The IRS reopened its PTIN system on Saturday, but the webpage warned preparers that “[t]he PTIN system is being updated to reflect current requirements. Until those updates can be completed, a screen titled Continuing Education (CE) Completion may appear during PTIN renewal.”

Congressman asks IRS to clarify its response to return preparer registration injunction

On Thursday, U.S. Rep. Charles Boustany Jr., R-La., called upon the IRS to clarify how a federal court injunction halting its registered tax return preparer (RTRP) program affects preparers and taxpayers in the just-begun tax preparation season. Boustany, chairman of the Subcommittee on Oversight of the House Ways and Means Committee, stated in a letter to Acting IRS Commissioner Steven Miller that taxpayers and preparers need clear and immediate guidance on the status of the program and interim procedures.

“With the 2013 tax-filing season under way, it is unclear how the suspension of the program will impact taxpayers that rely on paid preparers, and the preparers themselves,” Boustany wrote. “Given the extensive marketing and outreach efforts conducted to promote the program, it is critical for taxpayers and preparers to be apprised of how the Jan. 18 court decision affects them.”

The IRS’s Return Preparer Office indicates that as of Jan. 3, 53,519 RTRPs had obtained PTINs for the 2013 filing season, with another 320,172 provisional PTINs issued (generally, RTRP applicants who had not yet passed the competency test).

However, as of the end of January, many questions surrounding the program had not been addressed, Boustany wrote in his letter to the IRS. He pointed out that the only indication of the program’s suspension was a link from a headline under a news column on the IRS’s home webpage to the statement (which also appeared on a “For Tax Pros” page).

“Unless a taxpayer is already aware of the court decision, there is no other notice on the website to indicate that the return preparer program has been changed in any way,” Boustany wrote.

He asked Miller to answer these questions by Feb. 13:

  1. Following the U.S. District Court’s decision, has the IRS conducted any outreach to taxpayers and others affected regarding the return preparer requirements?
  2. Does the IRS plan to make changes to its website that reflect the change in requirements and explain to taxpayers and preparers the proper protocol for this filing season?
  3. Does the IRS anticipate that the suspension of the program will impact tax administration during this filing season? If so, in what manner?
  4. Has the IRS made any adjustments to its 2013 tax filing season plans to accommodate more taxpayer inquiries on this topic? If not, has the IRS provided taxpayers with self-help options on its website that answer taxpayer inquiries?
  5. Can all paid tax preparers, registered, and unregistered, properly sign and file returns? If so, must a paid return preparer include a PTIN on prepared returns?
  6. Has the IRS suspended the issuance of PTINs? If so, will the IRS website be updated to reflect the new requirements?
  7. Are paid return preparers that met the competency and filing requirements prior to the U.S. District Court’s decision date permitted to continue using the RTRP credential?

Paul Bonner (pbonner@aicpa.org) is a JofA senior editor, and Alistair M. Nevius (anevius@aicpa.org) is the JofA’s editor-in-chief, tax.

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