PTIN Lawsuit Thoughts

You have probably already heard this but we want to share some thoughts about it.

The U.S. District Court for the District of Columbia ruled that IRS can require the use of a Preparer Tax Identification Number (PTIN) but could not charge a fee in connection with having a PTIN.  Assuming you have a PTIN, you are part of this class action lawsuit and affected by this decision.

There are approximately 700,000 preparers affected by this ruling.  Many of these tax preparers are jumping up and down with joy at the prospect of obtaining a refund of the amounts paid for PTINs over the years.

The cost to refund the PTIN fees collected over the past 6 years would cost approximately $250,000,000).  IRS has not yet said if it will appeal the decision.  Nor has IRS stated when any refunds would be issued.

BUT remember:
1) In many lawsuits the attorneys get their costs and fees first and the rest is distributed which means the full amount of the PTIN fees you paid may not be the amount you receive.

2) The refund of PTIN fees is income to you if you have previously deducted them, so you will end up paying income tax on any refund, including self-employment tax if you previously deducted this on Schedule C or a 1065 since the refund is reported back on the same form it was previously deducted from (except if you claimed the deduction on Form 2106 in which are the refund would go on Form 1040, line 21).  Don’t forget you will report the gross amount as income and then claim a deduction for costs such as the legal fees.

3) The US government is the body that will be paying these refunds, the attorney fees, etc.  This means the US government will have a few million less to operate under which means our taxes may go up.

4) Those of you who are EAs noticed a lower renewal fee in the past few years since there was some duplication between the PTIN and EA processing costs.  It would be reasonable for the EA fee to increase if there is no longer duplication of processing costs.

Just pleasant thoughts to keep in mind in case you have been “jumping up and down” with joy at this ruling.

This text has been shared with you courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

IRS Re-Opens PTIN System after Court Injunction

PTINs will be issued at no cost

Today, the IRS re-opened the PTIN System and is again issuing PTINs. Since the IRS is enjoined from charging a fee, it will issue the PTINs at no cost to the preparer.

If you currently have a PTIN, you can now log into your account to make changes and view CPE information as normal.

At this time, the IRS has no additional comments on whether it will appeal the recent ruling. Until that decision is made, expect no updates regarding the potential for PTIN fee refunds.

When more information is learned, it will be posted at irs.gov/taxpros.

Stay tuned for updates from National as new developments occur.

Court Rules IRS Cannot Charge Fee for PTINs

IRS Suspends PTIN Registration & Renewal

NATP Special Alert - The IRS announced the suspension of PTIN registration and renewal as a result of a court ruling on June 1, 2017, where the U.S. District Court for the District of Columbia granted the Plaintiffs' Motion for Summary Judgment in part, ruling that the IRS may continue to require PTINs, but may not charge fees for the issuance or renewal of PTINs.

As a PTIN holder, you are automatically part of the class action suit  unless you requested exclusion prior to December 7, 2016. Any potential refund of PTIN fees is contingent on the outcome of an IRS appeal, if filed.

The IRS is working with the Department of Justice and is determining how to proceed. As additional information becomes available, it will be posted at irs.gov/taxpros.

As a member of NATP, National will keep you posted as new developments occur.

Background

In 2010, the IRS attempted to regulate both credentialed and uncredentialled tax return preparers by promulgating regulations that established a new registered tax return preparer (RTRP) designation. The regulations required individuals other than enrolled agents, attorneys and CPAs to pass a one-time competency exam, pass a suitability check, and obtain and pay for a PTIN. The regulations also required continuing education and the annual renewal of the PTIN for all paid preparers.

In 2014, the D.C. Circuit addressed the regulations regarding the exam and education requirements, asking whether the IRS possessed the statutory authority to regulate tax preparers [Loving v. IRS., 742 F.3d 1013, 1015(D.C. Cir. 2014)]. The Court ruled that the IRS did not have that authority. After Loving, the only part of the regulations that remained was the PTIN requirement. Soon after, a group of preparers filed suit alleging the IRS did not have the authority to require a PTIN, much less charge a fee for obtaining it. As communicated in the November 22, 2016, TAXPRO Weekly, the Court allowed the current class action lawsuit.

ABCs of LLCs Seminar THIS THURSDAY!

The ABC's of LLCs Presented by the Massachusetts / Rhode Island NATP Chapter - June 8th, 2017

Join the Massachusetts / Rhode Island NATP Chapter on Thursday, June 8th, 2017 for our Seminar on the ABS's of LLCs. This half day event (8:00 am - 12:15 pm) will be held at the Best Western Royal Plaza Hotel in Marlboro MA. Registration details are below, and are handled online directly by National NATP. A link to the registration website is listed below. Please take a look at the details on our speakers and topics provided in this great update seminar including continental breakfast and great networking opportunities PLUS 4 CE Credit Hours.

• Register online with credit card.
• For more information or to register by phone, fax or mail, use this form.
• After June 7, please register at the door with the form above.

Topics:

The ABC's of LLCs - Everything you wanted to know about LLCs.


Presented by:

Cheryl Morse
MA/RI NATP Chapter Member

William Delaney, EA
MA/RI NATP Chapter Member