Video: Who gave the IRS the power to license tax preparers?

posted at 12:10 pm on March 13, 2012 by Ed Morrissey

The Obama administration’s regulatory adventurism has strangled small businesses and tamped down the economic recovery, and a new lawsuit from the Institute of Justice against the IRS gives one small demonstration of the damage done.  Joined by three independent tax preparers, IJ wants the court to block the IRS from enforcing a new regulation it enacted without any authority from Congress that would put as many as 350,000 independent tax preparers out of business (via Instapundit):

Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

But last year the IRS imposed a sweeping new licensing scheme that forces tax preparers to get IRS permission before they can work. This is an unlawful power grab that exceeds the authority granted to the IRS by Congress.

The burden of compliance will fall most heavily on independent tax return preparers and small businesses. Unsurprisingly, big firms such as H&R Block and Jackson Hewitt support the licensing scheme. As The Wall Street Journal explained: “Cheering the new regulations are big tax preparers like H&R Block, who are only too happy to see the feds swoop in to put their mom-and-pop seasonal competitors out of business.”

These regulations are typical government protectionism. They benefit powerful industry insiders and at the expense of entrepreneurs and consumers, who will likely have fewer options and face higher prices. But tax preparers have a right to earn an honest living without getting permission from the IRS. And taxpayers—not the IRS—should be the ones who decide who prepares their taxes.

That is why on March 13, 2012, three independent tax preparers joined the Institute for Justice in filing suit against the IRS in the U.S. District Court for the District of Columbia. This lawsuit challenges the IRS’s statutory authority to impose this licensing scheme, and seeks to overturn regulations that would affect an estimated 350,000 tax return preparers, forcing many of them to stop working in the occupation of their choice.

The support of big firms like H&R Block and Jackson Hewitt come as no great shock [full disclosure: I've been a very satisfied client of the former for many years].  Large players welcome government intervention in the form of licensing and regulation because larger firms have the resources to deal with it.  It gives them a competitive advantage over smaller firms, which don’t usually have the personnel to keep up with licensing requirements.  I’ve seen this before in other industries, where the licensing requirements get demanded by big firms that claim to be worried about the professional standards of their industry based on anecdotes of fraud or incompetence that hardly characterizes the type of work done by independents.  The net result is less competition, fewer jobs, and higher prices — because someone has to pay for the costs associated with licensing and “continuing education,” and all business costs eventually get paid by consumers.

If public policy demands licensing for tax preparation — and there may be a good case for it — then Congress should consider the question, not unelected bureaucrats.  The IRS should not have the ability to impose licensing requirements by executive fiat alone, especially given the impact it will have on independent preparers and their customers.


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The Commerce Cause Silly…

Oil Can on March 13, 2012 at 12:13 PM

If public policy demands licensing for tax preparation — and there may be a good case for it — then Congress should consider the question, not unelected bureaucrats. The IRS should not have the ability to impose licensing requirements by executive fiat alone, especially given the impact it will have on independent preparers and their customers.

“Congress? Never heard of it.”
/Obama administration

Bitter Clinger on March 13, 2012 at 12:17 PM

Ahhhh the American Way…using the power of government to thrwart your competition.

WashJeff on March 13, 2012 at 12:17 PM

Look at Illinois. Bastion of freedom and prosperity. Licensing HELL.

tom daschle concerned on March 13, 2012 at 12:18 PM

Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

Congress? That silly, anachronistic group? Don’t forget, we’ve got a fascist state now.

rbj on March 13, 2012 at 12:19 PM

THE KING!

KOOLAID2 on March 13, 2012 at 12:19 PM

Have any of the unlawful power grabs by this administration been reversed???

Peppa Pig on March 13, 2012 at 12:20 PM

Crap like this may explain why my new wife got a threatening letter from the IRS last year.

Her CPA claims that many of the clients whose taxes he prepared that year got the same letter.

teke184 on March 13, 2012 at 12:20 PM

These regulations are typical government protectionism.

Indeed. Does licensing occupations amount to protectionism?

Yes.

Ed, the link above is to the MinnPost.

Akzed on March 13, 2012 at 12:20 PM

And then once all of the tax preparing power is concentrated into one, two or three big companies, it will be so much easier for the IRS, well, you know……

DaveDief on March 13, 2012 at 12:22 PM

This is dear leader we are talking about, nothing to worry about
-lsm

Setting precedent that dems will cry foul once a gop president takes office

cmsinaz on March 13, 2012 at 12:23 PM

Do away with all licensing. It is not government’s business to decide who can or can’t practice or operate a business.

Dante on March 13, 2012 at 12:23 PM

Me thinks Ron Paul is going to have a fit!!
(sarc)

canopfor on March 13, 2012 at 12:23 PM

By the way, I would like to add that it burns my a$$ that Congress, at least the House, cannot see fit to challenge this usurpation of its power on its own.

DaveDief on March 13, 2012 at 12:24 PM

If the DoJ can unilaterally nullify laws (Texas voter ID) why cannot the IRS institute their own?

Welcome to government by the Departments of Circumlocution.

Difficultas_Est_Imperium on March 13, 2012 at 12:25 PM

Propane, never will happen methinks with the squishes we have

cmsinaz on March 13, 2012 at 12:26 PM

Propane????

Dang autocorrect

Time for lunch

cmsinaz on March 13, 2012 at 12:27 PM

If they can force you to pay taxes they can force you to go to the tax preparer of their choice – and eat your broccoli.

Smedley on March 13, 2012 at 12:27 PM

Why don’t Republicans take the lead in fighting all of these power grabs!? We are on our own out here and the “justice” department is part of the problem not the solution. If the Republicans made a big deal out of all these power grabs, maybe a few libs would realize that they could lose THEIR freedom as well.

Christian Conservative on March 13, 2012 at 12:27 PM

Crony socialism, and will there be even a peep (let alone impeachment) from so-called “Republican leaders” on this? Of course not …

Pure and simple, we now live in a mostly tyrannical state.

ShainS on March 13, 2012 at 12:27 PM

Speaking of Regulation!!

Richard Cordray
****************

Upon his appointment, Mr. Cordray promised vigorous enforcement and said the agency would focus in particular on the so-called nonbank financial companies — money transfer agencies, credit bureaus and private mortgage lenders, for example — that previously have fallen outside the authority of most bank regulators and consumer protection agencies.

http://topics.nytimes.com/top/reference/timestopics/people/c/richard_cordray/index.html

canopfor on March 13, 2012 at 12:28 PM

I know the problem well- I’m an architectural designer in MD; it’s increasingly harder to compete with the AIA old boys network that lobbies counties and states to place undue burden on smaller architectural firms like mine.

BKeyser on March 13, 2012 at 12:30 PM

Took three jumps to find the details I was interested in.

Under the plan, which would begin with the 2011 tax season, anyone who takes money to help people with their taxes will have to register with the IRS, and eventually pass competency tests and sign up for continuing education.

IMO, this is more than just a power grab by the Obama administration. If there is need for greater oversight of professional tax preparers, who the hell gave that regulatory power to the IRS instead of some industry group that self-regulates, oversees continuing education, etc. In short who put the jug-eared dictator in charge of tax preparers? It is hard to see how this isn’t the beginning of more power grabs in the future.

Happy Nomad on March 13, 2012 at 12:31 PM

Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

Congress? That silly, anachronistic group? Don’t forget, we’ve got a fascist state now.

rbj on March 13, 2012 at 12:19 PM

Congress can approve anything. I’m more impressed with constitutional authority, which the IRS skirts regularly.

gryphon202 on March 13, 2012 at 12:31 PM

“Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.”

Too bad it’s not an election year…

… or else this over reach of bureaucratic unconstitutional regulation by Obowma and his administration could be devestating.

What? Oh…

Seven Percent Solution on March 13, 2012 at 12:31 PM

Minnesota’s “licensing industrial complex” included 131 state-regulated occupations covering 27 percent of the work force in 2004, up from just 20 occupations covering 5 percent of the workers in 1950.

Those numbers come from Morris Kleiner, a labor economist at the University of Minnesota who has studied occupational licensing for more than 30 years. Kleiner estimates that shifting from licensing to certification could create more than 15,000 jobs in Minnesota. He testified at Gerlach’s hearing that occupational licensing laws reduce competition, thereby forcing Minnesota consumers to pay up to $3.6 billion more annually for goods and services and lowering the state’s economic growth by up to $1 billion a year.

Defenders of occupational licensing argue that it is necessary to protect consumers from threats to their health and safety. Kleiner and other economists counter that while this protection is justified for some occupations, for the most part it amounts to two practices that damage the economy: “rent-seeking” and “regulatory capture.”

Rent-seeking refers to efforts by interest groups to win greater economic benefits for themselves at the expense of the general public. Regulatory capture occurs when a regulatory agency created to act in the public interest instead advances the special interests of the entities it is charged with regulating.

The greater the push to curb questionable licensing practices, the more their defenders push back.

At Gerlach’s hearing, representatives from the International Brotherhood of Electrical Workers union and from associations of accountants, architects, auto dealers, audiologists, and electrical and mechanical contractors voiced concerns about the bill. So did officials from three state agencies — the Department of Labor and Industry, the Minnesota Office of Higher Education and the Department of Commerce — and from League of Minnesota Cities.

Akzed on March 13, 2012 at 12:32 PM

If public policy demands licensing for tax preparation — and there may be a good case for it — then Congress should consider the question, not unelected bureaucrats.

Obviously, Congress didn’t do anything about this and who knows when they would have, so their inactivity forced the Administration to use its power to take action where Congress wouldn’t.

Or something like that.

SouthernRoots on March 13, 2012 at 12:32 PM

And if they can force professional tax-preparers to be licensed, how long before they try to regulate tax preparation itself, requiring that all returns be prepared by licensed preparers?

If OCare isn’t overturned, there is no reason why they can’t do this too….

LibraryGryffon on March 13, 2012 at 12:34 PM

When cities decided that interior decorating needed a license; you should’ve known the game was over.

lorien1973 on March 13, 2012 at 12:34 PM

O/T. I don’t know if y’all have ever heard of the ‘Battle of Ahtens’, but this is a true and powerful story of fraud in voting and what vets did to help stop it. It is 13 minutes long, but well worth watching and if you agree forward.

http://voxvocispublicus.homestead.com/Battle-of-Athens.html
L

letget on March 13, 2012 at 12:34 PM

I know the problem well- I’m an architectural designer in MD; it’s increasingly harder to compete with the AIA old boys network that lobbies counties and states to place undue burden on smaller architectural firms like mine.

BKeyser on March 13, 2012 at 12:30 PM

You live in MD, enough said. Closest thing to the old Soviet Union this far from California (with the possible exception of MA). I know somebody who recently looked to getting a professional appraisal license there. The rules were so onerous to keep out competition he simply stuck with DC and VA. And as the commies of Annapolis don’t seem to understand, the greater the competition, the fairer the price for consumers.

Happy Nomad on March 13, 2012 at 12:35 PM

News tomorrow: Obama requires that all Senators and Congressmen who want to participate in the legislative process must obtain a license signed by Eric Holden.

Archivarix on March 13, 2012 at 12:35 PM

Too bad that Congress doesn’t control the purse strings or else a majority in the House could possibly reign in these out of control bureaucracies…

… What? Oh.

Seven Percent Solution on March 13, 2012 at 12:36 PM

News tomorrow: Obama requires that all Senators and Congressmen who want to participate in the legislative process must obtain a license signed by Eric Holden.

Archivarix on March 13, 2012 at 12:35 PM

I gotta say, the idea of competency tests and continuing education has some appeal when it comes to those who hold public office.

Happy Nomad on March 13, 2012 at 12:37 PM

Congress can approve anything. I’m more impressed with constitutional authority, which the IRS skirts regularly.

gryphon202 on March 13, 2012 at 12:31 PM

Constitution?? I have an iron constitution. I can eat arugula.
/Obama

Bitter Clinger on March 13, 2012 at 12:37 PM

Why don’t Republicans take the lead in fighting all of these power grabs!?
Christian Conservative on March 13, 2012 at 12:27 PM

Count the possible options.

1) They are afraid of challenging a Black President.
2) They are to stupid to form an effective counter strategy.
3) They do not disagree with the agenda.

Pick your poison…

SWalker on March 13, 2012 at 12:37 PM

Oops!

March 13, 2012, 11:09 AM
Tax Preparers Sue IRS Over Licensing
************************************

Three independent tax preparers filed a lawsuit Tuesday challenging the Internal Revenue Service’s authority to license them. The suit is supported by the Institute for Justice, a libertarian public-interest law firm that opposes government regulation. The case, called Loving v. IRS, was filed in federal district court for the District of Columbia.(More….)

http://blogs.wsj.com/totalreturn/2012/03/13/tax-preparers-sue-irs-over-licensing/
=================

The Complaint

http://www.ij.org/images/pdf_folder/economic_liberty/irs_tax_preparers/loving-v-irs-complaint_3_13_12.pdf

canopfor on March 13, 2012 at 12:38 PM

Too bad that Congress doesn’t control the purse strings or else a majority in the House could possibly reign in these out of control bureaucracies…

… What? Oh.

Seven Percent Solution on March 13, 2012 at 12:36 PM

Defund the IRS? If only.

Bitter Clinger on March 13, 2012 at 12:39 PM

License: Just another word for more taxes by unelected bureaucrats.

Why the hell do I need a license to carry a gun? Especially since the criminals don’t care about licenses.

kirkill on March 13, 2012 at 12:40 PM

O/T GaffeBiden Strikes Again!
—————————–

Biden: Failure of bin Laden raid would have made Obama a ‘one-term president’
***********

Submitted 14 mins ago from abcnews.go.com by editor
http://www.breakingnews.com/
==============================

http://abcnews.go.com/blogs/politics/2012/03/biden-failure-of-obl-raid-wouldve-made-obama-one-term-president/

canopfor on March 13, 2012 at 12:42 PM

In California I hear you need a license to be able to issue licenses.

In New York City (true story) there is a Bureau of Efficiency to help prospective restauranteurs navigate the complex number of licenses they’ll need to open a restaurant.

This is your brain on Progressive Liberalism.

kirkill on March 13, 2012 at 12:42 PM

The only power that the State has – has been ceded to it by the People.

For as long as the People are willing to give the State unrestrained power, the State will assert unrestrained power.

Now, for the really bad news – half of the People are cattle, waiting in the field for the rancher [State] to drop off some hay. In the interim, half of the People go “moo.”

For as long as there are so many cattle, the People will never recover their power from the State.

OhEssYouCowboys on March 13, 2012 at 12:44 PM

Why the hell do I need a license to carry a gun? Especially since the criminals don’t care about licenses.

kirkill on March 13, 2012 at 12:40 PM

Off to the gulag with you for even asking…

The real truth is that the founding fathers left zero wiggle room regarding the regulation of firearms ownership. They made their thoughts on the subject absolutely crystal clear.

Benjamin Franklin: Those who would give up essential liberty to purchase a little temporary
safety, deserve neither liberty nor safety.” (Nov 11 1755, from the Pennsylvania Assembly’s reply to
the Governor of Pennsylvania.)

Thomas Jefferson: “Laws that forbid the carrying of arms…disarm only those who are neither
inclined or determined to commit crimes. Such laws only make things worse for the assaulted and
better for the assassins; they serve to encourage than to prevent homicides, for an unarmed man
may be attacked with greater confidence than an armed man.” (1764 Letter and speech from T.
Jefferson quoting with approval an essay by Cesare Beccari)

John Adams: “Arms in the hands of citizens may be used at individual discretion in private self
defense.” (A defense of the Constitution of the US)

George Washington: “Firearms stand next in importance to the Constitution itself. They are the
people’s liberty teeth (and) keystone… the rifle and the pistol are equally indispensable… more than
99% of them [guns] by their silence indicate that they are in safe and sane hands. The very
atmosphere of firearms everywhere restrains evil interference [crime]. When firearms go, all goes,
we need them every hour.” (Address to 1st session of Congress)

George Mason: “To disarm the people is the most effectual way to enslave them.” (3 Elliot,
Debates at 380)

Noah Webster: “Before a standing army can rule, the people must be disarmed, as they are in
almost every country in Europe.” (1787, Pamphlets on the Constitution of the US)

George Washington: “A free people ought to be armed.” (Jan 14 1790, Boston Independent
Chronicle.)

Thomas Jefferson: “No free man shall ever be debarred the use of arms.” (T. Jefferson papers,
334, C.J. Boyd, Ed. 1950)

James Madison: “Americans have the right and advantage of being armed, unlike the people of
other countries, whose people are afraid to trust them with arms.” (Federalist Paper #46)

History had to be revised by a progressive controlled educational system for these facts to be so ignored and watered down as to advance the notion the founding fathers found both insane and insulting, reasonable regulation and public safety.

Thomas Jefferson perhaps said it best.

Thomas Jefferson: “Laws that forbid the carrying of arms…disarm only those who are neither
inclined or determined to commit crimes. Such laws only make things worse for the assaulted and
better for the assassins; they serve to encourage than to prevent homicides, for an unarmed man
may be attacked with greater confidence than an armed man.” (1764 Letter and speech from T.
Jefferson quoting with approval an essay by Cesare Beccari)

SWalker on March 13, 2012 at 12:44 PM

http://www.weeklystandard.com/blogs/ij-says-irs-breaking-law_633488.html

more information available at that link

CommentGuy on March 13, 2012 at 12:44 PM

“Well if you don’t see things our way your license renewal could be jeopardy…………understand?”

/IRS

What could go wrong?

antipc on March 13, 2012 at 12:45 PM

Licensing a trade or activity makes it illegal to engage in that trade or activity without a license. So it makes some peoples’ work illegal without govt permission.

Just what we need in these economic times.

If we went to a flat tax we wouldn’t need the IRS or tax preparers.

Akzed on March 13, 2012 at 12:46 PM

Someday what’s left of the world will look back and say, “Yeah…but PBHO and his cohorts made the trains run on time!”

Bishop on March 13, 2012 at 12:46 PM

This is step one. Step two is to require all returns to be signed by a licensed preparer.

John Deaux on March 13, 2012 at 12:47 PM

SWalker on March 13, 2012 at 12:44 PM

Excellent post!!

Bitter Clinger on March 13, 2012 at 12:47 PM

Someday what’s left of the world will look back and say, “Yeah…but PBHO and his cohorts made the trains run on time!”

Bishop on March 13, 2012 at 12:46 PM

But won’t PBHO first have to, ummm, build some high speed trains, or something?

SWalker on March 13, 2012 at 12:49 PM

Why the hell do I need a license to carry a gun? Especially since the criminals don’t care about licenses.

kirkill on March 13, 2012 at 12:40 PM

Have you ever seen a gun? I mean a real gun? Holy crap are those things scary with their 400 round bullet clips, stabbing attachments, flashlight tubes and those others things on ‘em. We are right to license them, in fact guns should be gotten rid of period.

Bishop on March 13, 2012 at 12:51 PM

Have you ever seen a gun? I mean a real gun? Holy crap are those things scary with their 400 round bullet clips, stabbing attachments, flashlight tubes and those others things on ‘em. We are right to license them, in fact guns should be gotten rid of period.

Bishop on March 13, 2012 at 12:51 PM

No, but I have a friend who knows somebody who thinks they once heard one go off…

SWalker on March 13, 2012 at 12:55 PM

Stupid flyover staters! Administrator Philip Dru KNOWS what is best for you! Now shut up and eat your peas!
/s

Marcola on March 13, 2012 at 12:55 PM

How about a 1 page tax form to put most of the IRS and the tax prep people out of business? There is no reason the average citizen should have to pay someone else to do their tax returns because of the ridiculous complexity of the tax code.

echosyst on March 13, 2012 at 12:57 PM

The IRS is also charging a licensing fee (and keeping the fee even if they turn down the potential licensee), and a fee for the test they will administer. This, from an agency that historically can’t answer half of the questions correctly from its own FAQ list, but expects licensees to be held to a real standard.

This is nothing more than a means of keeping the surviving practitioners in line, and thinning the herd. All the new penalties and massive increase in notices serve the same purpose.

MrKleenexMuscles on March 13, 2012 at 12:58 PM

No, but I have a friend who knows somebody who thinks they once heard one go off…

SWalker on March 13, 2012 at 12:55 PM

Wait…what? And he’s still alive? I know for a fact that the bullet fired from a 41mm revolver can travel through 3 houses and a car engine block before stopping; they are incredibly dangerous.

Bishop on March 13, 2012 at 12:59 PM

How about a 1 page tax form to put most of the IRS and the tax prep people out of business? There is no reason the average citizen should have to pay someone else to do their tax returns because of the ridiculous complexity of the tax code.

echosyst on March 13, 2012 at 12:57 PM

I’ll take “What are penalty’s” for $1000.00 Alex…

SWalker on March 13, 2012 at 12:59 PM

How about a 1 page tax form to put most of the IRS and the tax prep people out of business? There is no reason the average citizen should have to pay someone else to do their tax returns because of the ridiculous complexity of the tax code.

echosyst on March 13, 2012 at 12:57 PM

I’ve been able to prepare my own every year…so far.

Come to think of it, I don’t have a license to prepare my own taxes. I must be out of complicance with the IRS licensing process.

Bitter Clinger on March 13, 2012 at 1:01 PM

Wait…what? And he’s still alive? I know for a fact that the bullet fired from a 41mm revolver can travel through 3 houses and a car engine block before stopping; they are incredibly dangerous.

Bishop on March 13, 2012 at 12:59 PM

Well, my friend say’s that that guy can’t hear or see anymore, plus he is always dizzy and nauseous all the time…

SWalker on March 13, 2012 at 1:01 PM

Well, my friend say’s that that guy can’t hear or see anymore, plus he is always dizzy and nauseous all the time…

SWalker on March 13, 2012 at 1:01 PM

It was a very traumatic incident…

SWalker on March 13, 2012 at 1:02 PM

Simplify the tax system, get rid of them ALL.

I work by an JH office. All those people in the parking lot at the first of the year were getting a free check from the gov’t….

aniptofar on March 13, 2012 at 1:05 PM

Meh. I assume that H&R Block, et al. (or more likely their top executives individually) donated huge sums to the 2008 Obama campaign. One has to pay one’s debts you know.

2ndMAW68 on March 13, 2012 at 1:07 PM

If public policy demands licensing for tax preparation — and there may be a good case for it — then Congress should consider the question, not unelected bureaucrats

The real problem here is that an ordinary citizen needs to pay someone to file their own taxes.

The solution to the problem is to simplify the tax code so that you don’t need someone else to prepare your taxes.

That being said, if we are going keep the current tax code/system, there is a need to license the preparers. There are a lot of white collar criminals preparing taxes. Licensing will cull many of the criminal tax preparers.

There is also an issue of competence. The tax code and tax preparation are arguably more complex than say insurance or real estate both of which require licensing to establish minimum competence.

MessesWithTexas on March 13, 2012 at 1:08 PM

Here’s how it goes:
1 – Congress holds hearings
2 – IRS ‘officially’ backs of on regs
3 – next year (if King O is re-elected) there’s a 20x – 30x increase in audits on returns done by unfavored tax preparers.

Marcola on March 13, 2012 at 1:13 PM

Congress? That silly, anachronistic group? Don’t forget, we’ve got a fascist state now.

rbj on March 13, 2012 at 12:19 PM

Fascism is right. The government picking winners and losers.

Ward Cleaver on March 13, 2012 at 1:15 PM

Will this put CPAs out of business, too? Tax preparation is a huge part of their business.

Ward Cleaver on March 13, 2012 at 1:16 PM

I’m certain that the IRS would never look at political contributions in making the decision on approval or denial of a tax prep license, -would they?

slickwillie2001 on March 13, 2012 at 1:17 PM

Remember: http://www.politifact.com/truth-o-meter/statements/2010/mar/29/mark-kirk/kirk-says-health-care-bill-will-lead-irs-hire-more/

This is all to ensure that no ‘rogue’ CPA’s escape the plantation, don’cha’know.

pambi on March 13, 2012 at 1:18 PM

The real problem here is that an ordinary citizen needs to pay someone to file their own taxes.

MessesWithTexas on March 13, 2012 at 1:08 PM

Did you catch this part of the linked WSJ article?

In March, Treasury Secretary Timothy Geithner told a Ways and Means Committee hearing that he’d also like the IRS to begin sending taxpayers pre-completed returns.

We can certainly understand why Mr. Geithner wants government to do his returns, but please spare the rest of us. By insourcing tax preparation to the government, the IRS would shift the burden of objecting to any error onto the taxpayer instead of the IRS. That would change the dynamics of U.S. tax compliance, trending away from a voluntary system in which taxpayers are expected to be honest about declaring income and deductions—subject to audit. Instead, the feds would apply their standards, and a taxpayer would have to appeal for an exception to the same efficient folks at the IRS you can’t get on the phone at tax time.

Happy Nomad on March 13, 2012 at 1:22 PM

That being said, if we are going keep the current tax code/system, there is a need to license the preparers. There are a lot of white collar criminals preparing taxes. Licensing will cull many of the criminal tax preparers.

MessesWithTexas on March 13, 2012 at 1:08 PM

Nonsense. A friend of mine went to a preparer firm several years ago who altered her return after the fact to increase the refund by several hundred dollars, after my friend received her RAL. The additional money went directly to the preparer’s account. Heaven knows how many other returns they altered in this fashion. Their lie was discovered two years later, and my friend went through over a year fighting the IRS for subsequent refunds. Those preparers are licensed to this day. Simplification to the point where people can prepare their own returns is the only solution. Licensing them based on IRS whims is not the way to go.

MrKleenexMuscles on March 13, 2012 at 1:29 PM

The support of big firms like H&R Block and Jackson Hewitt come as no great shock

TurboTax could not be reached for comment.

mrt721 on March 13, 2012 at 1:37 PM

Beneath the merits of this case lies the most ironic facet:

An admitted tax cheat requires licensing for tax preparers. For a fee, of course.

I didn’t read the regulation, but do you need an IRS license to use TurboTax or a #2 pencil to prepare your own taxes?

BobMbx on March 13, 2012 at 1:39 PM

How about a 1 page tax form to put most of the IRS and the tax prep people out of business? There is no reason the average citizen should have to pay someone else to do their tax returns because of the ridiculous complexity of the tax code.

echosyst on March 13, 2012 at 12:57 PM

Agreed. The tax code is all about collection of information, transfer of wealth via welfare credits such as the EIC, and bennies to lobbyists (which always magically appear without source in conference committee). It needs to be replaced, by removing all passive income, tax on which at a far smaller rate (1-2% max) can be collected at the source. Remove all refundable tax credits. Install a flat 15% tax on cumulative welfare payments to the extent they exceed the poverty level. Make it easy to file on line, then tie the filing to the voter rolls, no tickee no shirtee. Institute a national sales tax, 1% for people on the voter rolls, 10% if they’re not, necessities exempt.

That would put the tax prep people out of business, and pitch most of the IRS and the phony tax courts. It would also clean up the voter rolls by removing the dead and the deadbeats, and rid ourselves of Acorn.

MrKleenexMuscles on March 13, 2012 at 1:39 PM

Not only that, but now the IRS will have the ability to track and pressure tax preparers who are a little bit too competent at representing their clients interests. What will happen in an audit when the IRS agent has the ability to not only attack the tax payer, but the authority to take the livelihood of your preparer?

2nd Ammendment Mother on March 13, 2012 at 1:46 PM

This lawsuit challenges the IRS’s statutory authority to impose this licensing scheme, and seeks to overturn regulations that would affect an estimated 350,000 tax return preparers, forcing many of them to stop working in the occupation of their choice

Ed, if there are 350,000 tax return preparers, then they all should be joining this lawsuit.

O/T What happened in November 2008 was not an election, it was a government coup imo.

bluefox on March 13, 2012 at 1:47 PM

Professional licencing is a state matter.

Resist We Much on March 13, 2012 at 1:48 PM

“The police power of the state particularly extends to regulating trades and callings.” Dent v. West Virginia, 129 U. S. 114 (1889); Watson v. Maryland, 218 U.S. 173 (1910).

“The right of the legislature, or the municipality acting under state authority, to regulate trades and callings in the exercise of the police power without federal interference under the due process clause of the Fourteenth Amendment is also well settled.” Gundling v. Chicago, 177 U. S. 183 (1900); Schmidinger v. Chicago, 226 U.S. 578 (1913).

Resist We Much on March 13, 2012 at 2:00 PM

This could also be used to unionize them, much like they did people running day care centers in Michigan.

dunce on March 13, 2012 at 2:06 PM

The tax code IS overly onerous, and complex, to the point of being utterly useless. I firmly believe that the IRS can now audit with impunity those individuals it sees as a threat to itself, or the executive branch. Can one honestly say he or she fully understands the tax code such that no omissions were made in error? If anyone failed to notice, audits are carried out with the air of “guilty until proven innocent.” While I understand the need for the government to collect revenue to keep the almighty federal government’s cogs grinding, I fail to understand how the house of thuggery, the Internal Revenue Service, promotes the do-good intentions of the tax dollar.

Perhaps it is time to look for another means of collecting revenue for the United States. A flat tax is looking better to me as time goes on….

Turtle317 on March 13, 2012 at 2:09 PM

How about a 1 page tax form to put most of the IRS and the tax prep people out of business? There is no reason the average citizen should have to pay someone else to do their tax returns because of the ridiculous complexity of the tax code.

echosyst on March 13, 2012 at 12:57 PM

Oh, they are working on a simplified tax form even as we speak.

How much did you make? _____
Send it all.

CJ on March 13, 2012 at 2:20 PM

News tomorrow: Obama requires that all Senators and Congressmen who want to participate in the legislative process must obtain a license signed by Eric Holden.

Archivarix on March 13, 2012 at 12:35 PM

One could say we’re already there. Exactly how many Reps or Senators don’t have law degrees in the assembly of the People?

Nutstuyu on March 13, 2012 at 2:24 PM

Someday soon it will be announced that organizations similar to ACORN have added licensed tax preparers to their scope of services. H&R Block and Jackson Hewitt might want to reserve their enthusiasm about embracing any policy from this administration. Check with the Catholic leadership to see how this strategy worked out for them.

sewer urchin on March 13, 2012 at 2:29 PM

Anyone have a link to the complaint itself? Need some light lunch-time reading.

Nutstuyu on March 13, 2012 at 2:29 PM

ED. i am a CPA. i am doing a tax return right now. i have prepared,or in the last few years, sbnce i am a bigshot now with my name on the door and knowledge that i cant even forget if i try, reviewed, over 12,000 tax returns. some for folks you’ve heard of. some folks on TV. some folks who run national not for profits. some folks in government; y office is just outside DC. i have seen returns prepared by “the former”, for 25 years. i urge you: get a second opinion. trust me.

we dont have a dog in this fight. CPAs. we have seen the work of H&RB and JH. and anything that puts THEM out of buisness would be a better act. but i jest. i dont want to government to do it; and i know based on their work product natural selection should do it.

t8stlikchkn on March 13, 2012 at 2:30 PM

Someday what’s left of the world will look back and say, “Yeah…but PBHO and his cohorts made the trains run on time!”

Bishop on March 13, 2012 at 12:46 PM
But won’t PBHO first have to, ummm, build some high speed trains, or something?

SWalker on March 13, 2012 at 12:49 PM

His friends in the Unicorn Services Industry Union will take a break from fueling “electric” cars and create some super-magicaliciously fast trains out of thin air.

Nutstuyu on March 13, 2012 at 2:37 PM

O/T What happened in November 2008 was not an election, it was a government coup imo.

bluefox on March 13, 2012 at 1:47 PM

Sure looks that way to me too.

itsacookbook on March 13, 2012 at 2:43 PM

The IRS licensing tax preparers is like prosecutors licensing defense attorneys. In the context of filing and defending tax returns the IRS is an advocate for the government. They shouldn’t have any say regarding who does or doesn’t represent tax payers.

Article I Section 8 on March 13, 2012 at 2:46 PM

I just found out this morning that Connecticut has apparently tried to add daycare providers to the union rolls. The governor did it by executive order last year because the legislature wasn’t moving fast enough for him. The bill is now up for discussion, but there is also a law suit because whether or not they want to be unionized, they don’t think executive fiat was the legal way to do it.

Of course if the bill go through, no one will be able to afford day care, and we’ll have even more unemployed people, both daycare workers, and parents (or children of seniors who need care), who will now have to stay home because the care will cost more than they can make at anything less than a upper management position.

LibraryGryffon on March 13, 2012 at 2:58 PM

Professional licencing is a state matter.

Resist We Much on March 13, 2012 at 1:48 PM

You took the words right out of my font. Much of what Obama attempts in terms of changes are end runs around the Constitution or on well established case law based on the Constitution. My guess is he is hoping to set artificial precedents, thereby creating some “legitimate” path to codifying it.

Personally, November 6th couldn’t come too soon.

DevilsPrinciple on March 13, 2012 at 2:58 PM

DevilsPrinciple on March 13, 2012 at 2:58 PM

If he gets away with this, he will be regulating me next. (I’m a lawyer). No thanks.

Before long, the Federal government would be licencing barber shops and nail salons, too.

Personally, November 6th couldn’t come too soon.

You’re not kidding!

Resist We Much on March 13, 2012 at 3:07 PM

I firmly believe that the IRS can now audit with impunity those individuals it sees as a threat to itself, or the executive branch. Can one honestly say he or she fully understands the tax code……………
Perhaps it is time to look for another means of collecting revenue for the United States. A flat tax is looking better to me as time goes on….

Turtle317 on March 13, 2012 at 2:09 PM

the diry little secret guy, is IRS has basically crashed the last 10-15 years. almost all competent personnel have left/retired. it is a bastion of affirmative action now. no one who works there in the lowest 3 or 4 levels actually understands anything they are doing. you have to get all the way to appeals to anyone who actually has code knowledge. its very very sad. i have dealt with them, on the ground, up close for 25 years. they are so dumb now its definately dangerous. the ‘machine’, the man, big brother, is an affirmative action hire, who works 30 hours a week, and gets 8 weeks vacation…and has no idea what its talking about. THATS dangerous. most “audits” by the way are called ‘machine audits’. they look at your account transcript, all that ‘stuff’ reported to you in January, its collected under your SSN in an account. eventually they get around to comparing everyting in your account to your return. it takes them about 15-18 months. so CP2000 (machine diff notices) are coming out soon for 2010. and the notices basically say “you left this income off your return, we refigured your tax including this unreported income, here’s your bill, pay”. in our experience about 80% of them are incorrect. if you ever get one dont pay it. oh here’s another fun fact: the IRS has no idea what your uincome or withholdings is when you file your return; probably. if you file it before the real due date, Oct 15th. the IRS has no idea what you eanred until they see your W2. every quarter your employer reports gross wages paid, and taxes withheld etc, and reconciles that to the taxes they (eomployer) have remitted to IRS, thats form 941. the first time IRS knows about YOU, exact details by person is the W2s. those are issued in march, and sent to SSA by the employer, the soc secur admin. they (SSA) then transmits the data TO IRS. that can sometimes take several months. so when you file your return, say in march, and they process it, and your refund, should you have foolishly overpaid your estimated taxes due, IRS has no idea (then) whats on your w2. funny huh?

t8stlikchkn on March 13, 2012 at 3:19 PM

Since tax preparation is a leading cause of stress, It is my opinion that all fees for filing taxes should be paid by the Affordable Healthcare Law (AKA Obamacare).

I also want a free unicorn…

playsalieri on March 13, 2012 at 3:31 PM

I have seen this coming since about 2010, my thought is the IRS can’t audit all the tax returns so it is forcing the tax preparer to audit for them. The IRS then only has to watch over the few hundred thousand tax preparers. If we get it wrong then we are in trouble and not the tax payer.
As for Jackson Hewitt and H&R Block, I’ve had to do a lot of amended returns after they have messed up even the most basic ones, so I would say competency is not their forte.

EVAmom on March 13, 2012 at 3:39 PM

Remember: there is only one candidate calling for the elimination of the income tax and the abolishment of the IRS.

Dante on March 13, 2012 at 3:46 PM

Who gave the IRS the power to license tax preparers?

This move by the IRS is simply a cynical attempt to enlist thousands of CPA’s and other preparers as unpaid IRS agents…and to thus force the “licencees” to adopt the IRS’ view on which deductions are valid and what tax strategies will be allowed, regardless of what the law actually says.

This is a huge and unconstitutional over-reach, representing ‘government ON the people’!

landlines on March 13, 2012 at 4:16 PM

Where, when, are the Pubbies going to attack this power grab? That said, what about tax preparation software?

Bob in VA on March 13, 2012 at 4:38 PM

Institute of Justice — you guys are superheroes in my book. A sincere thank you for your fine service to secure liberty.

Axion on March 13, 2012 at 4:39 PM

I wish I had time to comment in detail on some of the other comments but I’m too busy with tax season right now!

I will say to

Crap like this may explain why my new wife got a threatening letter from the IRS last year.

Her CPA claims that many of the clients whose taxes he prepared that year got the same letter.
teke184 on March 13, 2012 at 12:20 PM

that his new wife may need a second opionion. None of my client’s got threatening letters without at least some basis. I have seen a lot of crap returns by bad preparers, whether CPA’s or not.

I don’t really have a dog in this show (?) and agree about the abuse of power issue. CPA’s are exempt since our license already has more stringent requirments than the IRS and I don’t prepare returns at the typical H&R block lever (no offense intended Ed).

I also agree with

LibraryGryffon on March 13, 2012 at 12:34 PM

I think that if the IRS requires all returns to be prepared by licensed tax preparers then they will also set the price that can be charged for that service – Obamatax, same as Obamacare.

I could go on but need to get back to preparing returns under the free market system, while it lasts!

Ann on March 13, 2012 at 5:07 PM

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