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IRS vs. tax pros: Uncle Sam wins a bit, loses some in Round 2 of legal battle with preparers over registration and testing

February 2, 2013

So how's tax filing season going for you?

Despite Internal Revenue Service arguments that this tax filing season would be more messed up that it already is thanks to late Congressional action, things seem to be going along as well as can be expected.

That probably factored into a federal judge's rejection of the IRS request that he lift an injunction against its oversight efforts aimed at unlicensed paid tax preparers.

Plus, no one I talked to really expected U.S. District Judge James E. Boasberg of Washington, D.C.,to reverse himself.

Just two weeks ago, Boasberg sided with three tax preparers who went to court to stop the IRS from testing (for a fee) tax pros who aren't otherwise required to meet professional standards.

Basically, the IRS wants to ensure competency of tax preparers who aren't attorneys, CPAs or Enrolled Agents. To do so, it created the Registered Tax Return Preparer, or RTRP, program and instituted a test for such preparers. The trio of independent tax preparers contend the IRS doesn't have the authority to do this.

In agreeing with the preparers on Jan. 18, Boasberg issued an injunction against the IRS' RTRP actions. So the IRS halted the program, including issuance of preparer tax identification numbers, or PTINs.

The IRS went back to Boasberg and asked him to lift his injunction at least until the agency's appeal is heard. The IRS argued that the filing season would be chaos if it couldn't use systems it had in place to administer the process.

But filing season 2013 opened on Jan. 30 with the court order in effect and the world, tax and otherwise, didn't stop spinning.

So it's no surprise that in his ruling on the IRS request yesterday, Feb. 1, Boasberg left his injunction in place.

He did, however, clarify things a bit:

"The Injunction is MODIFIED to make clear 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; instead, they may remain, but 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."

Today the following message shows up when you try to download Form W-12, used to obtain or renew a PTIN:


IRS vs tax preparers PTINs 2013 filing season

So, as the W-12 announcement notes, the IRS is in the process of reopening its PTIN system.

I'm not sure if this website info is enough for the Ways and Means Oversight Subcommittee chair who also wants answers from the IRS about its RTRP system, but it's all we've got right now.

More from the judge: Basically, in this latest ruling Boasberg pointed out that his original injunction doesn't affect the requirement for paid tax return preparers to have and use a PTIN.

As noted in my Bankrate Taxes post on this case, the PTIN system was essentially OK'ed when another federal judge ruled last June that the IRS could collect a fee for PTINs.

But the IRS apparently shut it down in an abundance of caution. Or maybe in an abundance of pique at the ruling. They were taking their PTIN and going home and to heck with everyone else who's involved. Not that I'm saying the IRS would be that petty. Just sayin'.

The National
Association of Tax Professionals (NATP)
also reports that following
Boasberg's latest order, it had received the following information from
the IRS:

The recent Loving v. IRS court ruling does not affect the requirement for paid tax return preparers to have and use a PTIN. As such, the PTIN system is now reopened for processing renewals and new applications. Please note the alert that is located on the login screen:

ALERT: The 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. Please check either one of the boxes on that screen. This information is NOT being collected, but you must check a box to advance to the next screen. We apologize for any inconvenience.

The PTIN helpline is tentatively planned to open on Monday.

As for the paper PTIN renewals and application, the IRS will begin expeditiously processing them on Monday.

And Boasberg actually seemed to agree with the general IRS position that tax pro education could be a good thing.

In his order, Boasberg wrote that the IRS "may choose to retain the testing centers and some staff, as it is possible that some preparers may wish to take the exam or continuing education even if not required to. Such voluntarily obtained credentials might distinguish them from other preparers."

But will such credentials eventually be required? That will be decided by other judges. And it likely will be be well after this filing season before we get their final rulings.

You also might find these items of interest:

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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