The Loving case is not so loving. Competent income tax preparers are disappointed. The taxpaying public will be the losers.

Starting in 2011, the IRS began its return preparer oversight initiative. The purpose of this initiative was to help insure that income tax preparers who charge for their services were competent to perform these services.

In the first phase, the IRS required all paid tax preparers to obtain a preparer tax identification number (PTIN), subject to some exceptions. This was to be renewed annually. The next phase was to require all paid preparers who prepare individual income tax returns to complete a IRS tax filing review and successfully pass the registered tax return preparer (RTRP) competency exam. RTRPs also must obtain 15 hours of continuing education annually from IRS-provided providers.

After the IRS launched this initiative, the Institute for Justice, a public interest group, representing three unenrolled return preparers, challenged the new rules in federal court.

Court’s Opinion:
The U.S. District Court for the District of Columbia ruled in favor of the unenrolled return preparers (Loving v. Internal Revenue Service, D. D.C., 2013-1 USTC ¶50,156). It has stopped the IRS from moving forward with its return preparer oversight initiative.

IRS Responded:
After the decision, the IRS stated that “[i]n accordance with [the injunction], tax return preparers covered by this program are not currently required to register with the IRS, to complete competency testing or secure continuing education.”

Others Comment:
According to a report from CCH, “The National Society of Accountants (NSA) is disappointed,” said John Ams, executive vice president. “NSA has long supported the registration of paid preparers and continuing education requirements so that preparers have the up-to-date knowledge needed to prepare complete and accurate tax returns for their clients.”

The CPAs and staff of Conover & Conover, CPAs, PSC, agree with the NSA. We believe that taxpayers deserve to know that those who charge to prepare an income tax return are competent to prepare the return. Taxation is part of the uniform CPA exam that all CPAs have passed and CPAs in Kentucky are required to have 40 hours of continuing education per year.

[Some of the information presented here was provided by CCH in its Practical Tax Bulletin, 2013, #4]