IRS's Proposed Voluntary Program for Tax Preparers is “Unlawful and Improper,” Says AICPA

June 24, 2014

The American Institute of CPAs (AICPA) has expressed strong concern that the Internal Revenue Service’s (IRS) proposed voluntary certification program for tax return preparers “would cause significant legal problems that may ultimately frustrate the IRS’s goals, confuse the public, and lead to litigation.”

In a June 24 letter to the IRS, AICPA Chairman of the Board of Directors William E. (Bill) Balhoff, CPA, CGMA, CFF and President and CEO Barry C. Melancon, CPA, CGMA wrote, “We have repeatedly expressed to you and your colleagues that our members have very significant concerns regarding a voluntary certification program and urged the IRS to have a formal comment period to obtain and consider the public’s views prior to moving forward…However, it is our understanding that the IRS has no intention of slowing down or considering viable alternatives.  Therefore, we feel compelled to consider our next steps, and to raise more formally our legal and policy concerns with the IRS’s current path.”

Describing the proposed program as “unlawful and improper,” the letter stated that it is essential that any regulatory approach instituted by the IRS to address this issue has a firm legal basis and reflects sound policy.  “We continue to believe that additional regulation of tax return preparers might yield significant benefits and that the IRS can achieve these objectives while remaining consistent with Loving [v. IRS, rejecting an earlier IRS attempt to regulate tax return preparers] and other statutory limitations on the IRS’s authority,” the letter stated.

The AICPA’s letter emphasizes the following points:

  • First, no statute authorizes the proposed program;
  • Second, the program will inevitably be viewed as an end-run around Loving v. IRS;
  • Third, the IRS has evidently concluded, in developing the proposed program, that it need not comply with the notice and comment requirements of the Administrative Procedure Act.  This is incorrect; and
  • Finally, the current proposal is arbitrary and capricious because it fails to address the problems presented by unethical tax return preparers, it runs counter to evidence presented to the IRS, and it will create market confusion.

“We value our longstanding and constructive relationship with the Internal Revenue Service, and we look forward to continuing to work with the IRS to develop workable solutions to important public policy issues, including our shared goal of crafting an improved regulatory approach to tax return preparers,” the AICPA wrote.

Previous Action 

On May 21, following a number of meetings with IRS staff, including two with IRS Commissioner John Koskinen, the AICPA formally expressed its opposition to the proposed voluntary certification program in a letter to Commissioner Koskinen.

The AICPA urged the IRS in the May 21 letter to utilize the current PTIN program, which the Loving decision left intact, to track preparer activity, identify patterns of fraud and incompetence across returns prepared by specific individuals, and to institute compliance programs to deal with incompetent or unethical preparers.  The AICPA also encouraged the IRS to administer the penalties and sanctions for which it currently has authority to identify and hold accountable incompetent and unethical return preparers.  Six specific penalties were identified in the letter.