Tuesday, September 29, 2015

Registered Tax Return Preparer Status May Be Reinstated

By William Delaney, EA
Westwood, Massachusetts
A proposal currently scheduled for hearing by the U.S. Senate Finance Committee described as a “Bill to Prevent Identity Theft and Tax Refund Fraud” includes a major provision which would mandate the regulation of all presently unregulated paid tax return preparers by reestablishing the Registered Tax Return Preparer status.

The approach is to amend Title 31 of the U. S. Code (from which the Treasury derives its authority to regulate under Circular 230) so that it will “…encompass all aspects of Federal tax practice, without regard to whether or not it includes representation before the Treasury.”

You may recall that a major issue in the Loving decision had to do with the definition of practice or representation (presenting a case) before the Treasury.  The IRS tried to expand the statutory definition of representation so that it could regulate everyone, but the Loving Courts both strongly disagreed.  This Bill would override the Loving decision by amending the statute (which is what should have been done by IRS/Treasury when they first proposed the RTRP concept).

The proposal would require the Treasury and the IRS to expeditiously:  “(i) approve third-party examination and continuing education providers for purposes of allowing individuals to obtain registered tax return preparer status; (ii) establish a program for evaluating and approving State-based tax credential programs for purposes of providing individuals with registered tax return preparer status; and (iii) end the voluntary Annual Filing Season Program.”

Provision (i) would recognize credentials such as those issued by ACAT as sufficient for also obtaining RTRP status; (ii) would recognize programs presently in place by states such as OR as sufficient for also obtaining RTRP status and (iii) it would end the AFS so-called “voluntary” Program.

Finally, in the same area of tax preparer regulation, “The proposal also authorizes the IRS to revoke identifying numbers issued to tax return preparers (PIN number) for failure to comply with regulations…”

Since this proposal is part of a larger bill which deals with identity theft and similar issues, it promises to be a popular topic which might just make it through the Congress if our legislators are not suffering from a permanent case of distraction and disarray.

More to follow, that’s for sure.

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