So, did everyone hear that a judge told the IRS that their plan to license tax preparers was flawed?

In the past few years the IRS (presumably with the blessing of elected officials) has taken to steps to require that anyone signing a tax return as a paid preparer be licensed. Practically speaking, this “licensing” requires them to pass a test and have 15 hours of continuing education each year.

The judge said that the IRS does not have the legal authority to license preparers. The IRS relied on a 1884 law that gives them the authority to regulate who can “practice” before the IRS.

I like this quote from the attorney for the “winning” side –

“Today’s ruling is a victory for hundreds of thousands of tax preparers across the country and the tens of millions of taxpayers who rely on them to prepare their taxes,” lead attorney Dan Alban said. “This was an unlawful power grab by one of the most powerful federal agencies and thankfully the court stopped the IRS dead in its tracks. The court ruled today that Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.”

Tell that to my client who had some attorney attempt to prepare their return years ago. This taxpayer was a minister so the return was a little more complicated than most, but the attorney did such a bad job that they were immediately audited and had to pay more than they ever planned on.

But the thing that bothers me the most is knowing that the tax preparers who have no interest in taking the test to prove a minimum level of competence and have no interest in spending a whopping 15 hours per year in continuing education are the preparers cheering this ruling and also the preparers who make most of the mistakes, either intentionally disregarding the law or through just plain incompetence.

No one should cheer a ruling that allows incompetency in any field, including tax preparation. Seems like as a society we’d want those involved in tax preparation to have to demonstrate some minimum level of ability.

What do you think? Should tax preparers be licensed and have to show some ability (by taking one test) and then have to show they took 15 hours of education each year, or is this just another example of the federal government going too far?