State Board Report

May 2012

The Internal Revenue Service has shifted its resources from dealing with taxpayers one-by-one to dealing with the tax preparers, who in total prepared more than 95,000,000 individual and business tax returns in 2011, IRS Commissioner Douglas H. Shulman told the National Press Club on April 8, 2012. He reported 840,000 preparers have been registered, and those who are not CPAs, attorneys or enrolled agents must pass a competency test and complete 15 hours of continuing education per year. "Using better data on return preparers that we gained through our return preparer initiatives and faster processing cycles achieved through CADE2, we applied advanced data analytics to link tax returns that showed potentially serious compliance issues to the individuals who prepared them. We identified a number of preparers with apparently inaccurate returns and, depending on the type and severity of the issue, are applying different types of compliance tools," he told the National Press Club.

The IRS's authority to license tax return preparers is being challenged by the Institute for Justice, which filed a suit with three independent tax preparers against the IRS in the U.S. District Court for the District of Columbia on March 13, 2012. Joining in the suit are Sabina Loving of Chicago, Elmer Killian of Eagle, WI, and John Gambino of Hoboken, NJ.

In this statutory challenge, the Institute for Justice claims it "will demonstrate that the IRS's expansive interpretation of 'practice' in Circular 230 is at odds with the text, legislative history and purpose of 31 USC § 330. 'Practice' before the IRS was originally meant to denote the professional practice of attorneys and CPAs in representing taxpayers in proceedings before the IRS – such as arguing their client's case in a hearing before an IRS Appeals Officer – not simply preparing or filing a tax return."

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